25 June 2019 Americas/United States Equity Research Restaurants Domino’s Pizza Inc. (DPZ) Rating OUTPERFORM Price (21-Jun-19, US$) 280.33 INITIATION Target price (US$) 320.00 52-week price range (US$) 300.67 - 234.35 Market cap(US$ m) 11,523 Time to Get A Piece of This Pie; Initiate Enterprise value (US$ m) 14,963 Target price is for 12 months. Outperform Research Analysts ■ We initiate coverage of Domino’s (DPZ) with an Outperform rating and Lauren Silberman 212 325 2720 $320 target price. DPZ is one of the best growth stories in restaurants, with
[email protected] ~10% revenue growth, margin expansion and benefits from repurchases driving an EPS CAGR of ~15% over the next four years. We believe concerns regarding the impact of third-party delivery could be overdone as the honeymoon phase wears off and carryout could offset pressure, with outperformance against SSS estimates as upside. Confidence in ~7% global unit growth is driven by global brand strength, domestic whitespace opportunities in a fragmented category and international master franchise agreements. ■ US SSS Outperformance: DPZ should maintain SSS momentum and share gains as one of the few companies with contribution from positive traffic, the only company with a frequency-based loyalty program, consistent value messaging, favorable franchisee relations (avg franchisee ~$975K EBITDA) and an industry-leading digital ecosystem supporting best-in-class execution. We estimate US SSS of 5.5% in 2019, with expectations for sequential improvement throughout the year against easing compares and reduced competitive headwinds from 1Q (Points for Pies, QSR chains delivery campaigns).