Domino's extends losses as Macquarie, Citi slices target price
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The news: Shares in Domino's Pizza edged lower ahead of its annual general meeting today, after Macquarie and Citi lowered their target prices on the pizza chain, driven by lower same-store sales at the start of FY25.
The numbers: Domino's shares fell by more than 1% at market open on the ASX before recouping most of the losses by midday AEDT.
Shares closed 6.3% lower on Monday, after the company announced the retirement of its long-time chief executive and managing director Don Meij and a softer-than-expected trading update.
Analysts made the following revisions after Domino's trading update:
- Macquarie retained its 'neutral' rating but reduced its target price by 8% to $32.20. Macquarie revised down its earnings-per-share forecasts by 7% to 10% between FY25 and FY27.
- Citi kept its 'buy' rating by cut its target price by 3% from $38.50 to $37.50. It also lowered its NPAT estimates by 3% to 5% across FY25, FY26, and FY27.
- Morningstar maintained its fair value estimate of $58, forecasting a 20% earnings compound annual growth rate for the next five years.
The context: Macquarie and Citi reduced their target prices on the Domino's due to slower-than-expected same-store sales during the first 17 weeks of the 2025 financial year.
Macquarie analysts said the hiring of an external CEO suggests potential for strategic change across the business. On Domino's trading update, the analysts noted that Australia is growing on last year's sales, while Germany, France and Japan saw negative same-store sales for the year-to-date period.
Morningstar analyst Johannes Faul noted that incoming CEO Mark van Dyck "appears to have the relevant experience necessary to turn around Domino's underperforming French and Japanese businesses", which account for around 40% of its global store network.
Faul flagged that Domino's shares screen as "significantly undervalued", with the market extrapolating the current weakness and underestimating the "massive growth" of the company's global network.
What they said: "Potential strategy update will be key for [Domino's] from here, with the business recently underperforming on store rollout and sales growth, particularly offshore," Macquarie analysts said.
"We await further detail on the direction of the business from the new CEO," they said.
The sources: Morningstar research, Macquarie research, Citi research
