Domino's Pizza Inc, listed on NASDAQ under the ticker DPZ, saw its shares trade lower on Wednesday following a reassessment from Guggenheim analyst Gregory Francfort. Francfort maintained a Neutral rating on the stock but reduced his price target from $490 down to $450. The company is expected to release its fourth-quarter financial results on February 23 at 8:30 a.m.
Analyst's Revised Outlook
Gregory Francfort adjusted his earnings projections slightly downward for fiscal years 2025 and 2026. He attributed the revised estimates to persistent pressures affecting the broader pizza industry and anticipated these challenges to continue into the latter half of 2026. Francfort observed that the stock's valuation appeared more balanced after its share price dipped below the $400 level earlier in the month.
He also pointed out that the potential for downside appears somewhat limited at present despite ongoing obstacles such as difficulties within the pizza category and ongoing market consolidation trends. Moreover, Francfort indicated that investors might find more attractive entry points for the stock due to upcoming more difficult comparisons for the mid-February period, which correspond to last year's significant promotional campaign marketed as the "Best Deal Ever."
Q3 Performance vs. Q4 Expectations
Domino's reported a robust comparable sales gain in the U.S. during the third quarter, demonstrating solid momentum. However, Francfort cautioned that the fourth quarter may present slower growth. He revised his forecasts to reflect quarterly same-store sales growth rates below consensus estimates, citing weaker demand within the overall industry.
Several factors, including calendar shifts, variances in weather conditions, and changes in the timing of promotional activities, have made it harder to discern near-term trends with clarity. For instance, January's promotion-focused "Boost Week," which emphasized carryout orders, coincided with unusually cold weather, limiting its effectiveness in driving customer traffic.
Industry Context and Competitive Dynamics
Looking ahead into early 2026, Francfort anticipates a modest improvement in trends, partly fueled by the tax refund season, which historically supports consumer spending. He noted that Domino's currently trades at a valuation discount compared to major quick-service restaurant peers. This gap primarily stems from concerns about slower global expansion in store units and uncertainties regarding long-term growth prospects within the pizza category.
The analyst discussed how increasing competition from third-party delivery services, which span multiple cuisine types, has intensified competitive dynamics and put pressure on Domino's historical growth rates. Despite these challenges, Domino's U.S. pizza market share has expanded since the onset of the pandemic. Francfort believes there is still scope for further gains, especially as competitors such as Pizza Hut and Papa John's International, Inc. (NASDAQ:PZZA) face difficulties.
A potential divestment of Pizza Hut could lead to accelerated closures of their stores, which may indirectly bolster Domino's sales by removing some competition from the market. Nonetheless, Francfort warned that even if Domino's gains market share due to competitor retreat, it might only partially compensate for the waning promotional benefits that were seen in 2025.
He estimated that while competitor closures may add incremental sales growth, they are unlikely to restore Domino's previous peak momentum fully.
Capital Structure and Financial Considerations
Regarding Domino's capital structure, Francfort does not foresee the company issuing new debt in 2026 amid the current environment of elevated interest rates. This view reflects caution in leveraging amid higher borrowing costs.
Market Reaction
At the time of publication, Domino's shares were priced at $404.10, marking a decline of approximately 2.36% on the trading day, according to Benzinga Pro data.