Domino's Dumped On Broker Downgrades
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Another dump Domino’s Pizza shares yesterday after a couple of brokers gave the stock a less than glowing review.
Domino’s shares fell to their lowest level in more than a month as investors sold in the wake of analysts’ downgrades.
Shares in the fast food company fell 9.52% to a day’s low of $48.28, a level last seen at the end of May before struggling higher to $49.12 thanks, but then fading towards to finish at $48.92, down 9.1%.
DMP seems to be a stock that is now under suspicion from investors.
The slump came after analysts at Credit Suisse issued a report cutting their Domino’s share price target to $36.76 from $42.47, blaming concerns over a federal parliamentary inquiry into the franchise industry, rising labour costs and questionable growth prospects in Japan and Europe.
The joint federal parliamentary committee inquiry into the franchise industry is due to deliver its final report by September 30 this year.
Citi also cut the fast food operator’s rating due to a belief that weakness in Japan will lead to earnings downgrades in financial year 2019.
Citi analysts set a new, price target of $46.30 which is far more optimistic that the Credit Sussie target. Domino’s its due to report its 2017-18 figures next month.
In the half year results announced in February, Domino’s lifted profit 17% to $58.7 million.
Australian and New Zealand sales increased 7.1% to $557.8 million for the six months, but the question mark is over sales growth in France and Japan.
Domino’s forecast same-store sales growth (basically network revenue growth after excluding the revenue of any new store, any existing store in the same territory as a new one, or stores that close), between 6% and 8% for 2017-18 in both Australia-New Zealand and Europe, and between 0% and 2% in Japan.
In Australia and New Zealand same store growth was just 3.7% in the six months to December. In the first five weeks of the June 30 half, it was 5.9%.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.