Morgans tips Domino’s shares to deliver 50% return

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price and Pizza Hut's threat to the business

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price and Pizza Hut's threat to the business

I think it is fair to say that Domino’s Pizza Enterprises Ltd (ASX: DMP) shares have been having a tough year.

For example, on Friday the pizza chain operator’s shares ended the week at $60.87, which is just a fraction higher than their 52-week low.

Time to buy Domino’s shares?

One broker that believes investors should be seizing on this weakness is Morgans.

According to a recent note, the broker has recently retained its add rating but trimmed its price target on the company’s shares slightly to $90.00.

Based on where Domino’s shares are trading today, this implies potential upside of almost 50% for investors over the next 12 months.

And with the broker expecting a $1.73 per share partially franked dividend in FY 2023, this adds a further 2.8% yield to the equation.

What did the broker say?

Morgans acknowledges that the last 12 months have been difficult for the company. However, it appears confident that the worst is over and “it will get better from here.”

The broker highlights that price increases and operating efficiencies should help offset inflationary pressures. It explained:

Higher prices, operating efficiencies and menu enhancements are already allowing DMP to offset cost inflation in ANZ and Asia. It’s been slower in Europe, but it appears progress is being made. With the prospect of some relief in commodity price inflation and reduced losses in Denmark, we expect margins to rise in FY23.

In light of this, Morgans is forecasting double digit earnings growth in both FY 2023 and FY 2024. It commented:

The transition out of COVID-19 tailwinds and into an environment of inflationary pressure and reduced consumer confidence made FY22 a challenging year for Domino’s Pizza. EBIT fell by 10.5% as both Asia and Europe reported reduced margins and same store sales growth. We believe it will get better from here. We forecast 12.9% EBIT growth in FY23, followed by 19.5% growth in FY24.

All in all, its analysts appear to see this as the potential turning point for Domino’s shares.

The post Morgans tips Domino’s shares to deliver 50% return appeared first on The Motley Fool Australia.

Should you invest $1,000 in Domino’s Pizza Enterprises Limited right now?

Before you consider Domino’s Pizza Enterprises Limited, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Domino’s Pizza Enterprises Limited wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

See The 5 Stocks
*Returns as of August 4 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/3ZWqyBL

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s