DPZ Changing Our Rating on the Shares of Domino’s
With this report, we downgrade the shares of Domino’s (DPZ) to Neutral (from Buy). Our downgrade reflects (1) growing concerns that over the next 12-18 months, competition from third-party delivery aggregators will have a larger (i.e., worse) effect on Domino’s U.S. same-store sales than they did over the last 12-18 months, (2) our worries that the law of large numbers may have finally caught up with Domino’s U.S. following the annual +5.4% to +12.0% same-store sales gains of 2013-18, (3) rising competition from the leading fast-casual pizza concepts, particularly privately-held Blaze Pizza, whose co-founder Rick Wetzel comments “There’s a huge opportunity to go at Domino’s in particular,” and (4) the possibility of a reinvigorated Papa John’s (PZZA; Buy) down the road, given that concept’s recent hire of a new “change agent” CEO.