Domino’s Shares Down 80% From Peak, What's Happening?

2 min read | November 29, 2024 11:35 AM AEDT | By Team Kalkine Media

Domino’s Shares Down 80% From Peak, What's Happening? — Image source: shutterstock

Goldman Sachs’ Optimistic Outlook

Goldman Sachs believes Domino's current challenges may represent a buying opportunity. The broker has issued a “Buy” rating, citing the recent appointment of a new CEO, Andrew van Dyck, as a pivotal step in reinvigorating the company.

Van Dyck, who brings decades of executive experience from Coca-Cola Enterprises and Compass Group, is expected to bring precision in execution, improved risk management, and optimized operations. Goldman Sachs commented:
“Appointing a CEO from outside the company suggests the Board's determination to disrupt Domino's existing ways of working and inject new thinking.”

The company’s renewed focus on franchisee profitability is another key driver. Efforts to close underperforming locations in Japan and France are seen as moves to strengthen its network, enhance franchisee profitability, and set the stage for future growth.

Valuation and Growth Potential

Goldman Sachs finds Domino's shares attractively priced, noting that the company is trading at an undemanding price-to-earnings (PE) ratio compared to its long-term average. The broker has set a price target of $39.10, implying a 20% upside over the next 12 months.

In addition to potential capital gains, Domino's is forecast to offer a 3.5% dividend yield in FY25. Together, this could deliver a total return exceeding 23% for investors.

Challenges and Risks

Despite the optimism, Domino's still faces hurdles. Inflationary pressures and past execution missteps have eroded investor confidence. While the new CEO brings promise, his lack of quick-service restaurant (QSR) experience introduces some uncertainty.

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