Tuesday, HSBC updated its outlook on Domino's Pizza (NYSE:DPZ) shares, raising the price target to $583 from $507 while maintaining a Buy rating. The new price target suggests a 10.6% potential upside from the current price.
The firm's analyst pointed to several factors underpinning the optimistic stance, including Domino's strong global brand and value proposition. The company is also seen as having accelerating development opportunities, which are expected to contribute positively to its financial performance.
The analyst's assessment is based on a forward-looking estimate applying a price-to-earnings (PE) multiple of 31.5x for the year 2025, which remains unchanged from previous evaluations. This multiple aligns with Domino's historical 10-year average and represents a slight discount of 3.6% to the stock's current level.
Domino's robust free cash flow (FCF) growth is another key highlight, with a compound annual growth rate (CAGR) of 13.2% projected from 2023 to 2026. This growth is anticipated to be supported by a significant share buyback program, with the company planning to repurchase $1 billion worth of shares.
In conclusion, HSBC reaffirms its Buy rating for Domino's Pizza, emphasizing the company's competitive strengths and favorable financial projections as the basis for the raised price target.
InvestingPro Insights
As Domino's Pizza (NYSE:DPZ) garners a favorable outlook from HSBC, real-time data from InvestingPro provides a nuanced perspective on the company's current financial standing. With a market capitalization of $18.36 billion, Domino's is trading at a high earnings multiple, with an adjusted P/E ratio for the last twelve months as of Q1 2024 standing at 34.92, which is reflective of the company's strong brand presence and market expectations for future growth.
InvestingPro Tips highlight that Domino's has not only raised its dividend for 10 consecutive years but has also maintained dividend payments for 13 consecutive years, underscoring the company's commitment to returning value to shareholders. Additionally, the stock has achieved significant returns, with a one-year price total return of 68.28% as of the date provided, showcasing its robust performance in the market.
For those considering an investment in Domino's, it's worth noting that the company has had a strong return over the last week, month, and three months, with figures standing at 9.55%, 6.09%, and 24.09% respectively. This momentum is a testament to the company's operational success and market confidence. For further insights and tips, including 16 additional InvestingPro Tips for Domino's Pizza, interested investors can explore more at: https://www.investing.com/pro/DPZ. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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