Domino’s Pizza’s (DPZ) Q4 backs the “improving narrative” into 2024, with potential growth in delivery and carryout, as well as accelerated unit growth in the US this year, Morgan Stanley said in an emailed note to clients Tuesday.
The investment firm raised its price target on the company to $485 from $465 and kept its overweight rating.
Domino’s on Monday reported higher earnings and revenue in fiscal Q4.
Domino’s expects to drive transaction growth in delivery and carry out excluding impact from Uber Technologies’ (UBER) Uber Eats, reach 3% of sales from Uber by the end of 2024 and see a low-single-digit percentage of pricing due to wage inflation, according to the note.
“If one believes the first part of that, which was visible in the Q4 but may remain a point of debate, [more than] 5% comps could be on the table for the year, as we have been assuming,” Morgan Stanley said.
Domino’s also expects international sales to improve in H2 amid slower sales in the near term. “Many of the same US initiatives are also spreading to international markets in an effort to drive sales similarly, though we wouldn’t expect as much Uber impact outside the US,” said Morgan Stanley, which estimates H1 international sales to be a “bit better” than Q4.
Morgan Stanley expects a flat US net addition to the company’s units in H1 before accelerating in H2. International additions should pick each quarter in 2024 on fewer closures while being driven by growth in China and India, according to the note.