By Peet Serfontein & Khumbulani Kunene
Domino's is an American multinational pizza chain known for its efficient delivery model and wide range of pizza and related offerings. The company operates a network of company-owned and franchised Domino's Pizza stores located throughout the United States (US) and internationally.
Over the past five years, the company has continued to demonstrate growth with 2023 being the highest performing year over the period. Consolidated revenue increased by 14.5% to $4.58 billion in 2023, aided by the group's flexible, asset-light business model and its value proposition that enabled management to adapt rapidly to external market conditions.
Technically, the price is testing its 200-week Simple Moving Average (SMA) (see the orange 200-week SMA trendline), which supports a bullish outlook. The weekly Bollinger Bands indicates a recent "buy" signal, suggesting a potential reversal from oversold conditions. The price persistently bounces back from the lower band, reflecting growing demand and potential upward momentum.
The recent upward trajectory of the On-balance volume (OBV) indicator supports the bullish outlook
Share Information
| Share Code | DPZ US |
|---|---|
| Industry | Consumer Services |
| Market Capital (USD) | 14.6 billion |
| One Year Total Return | 6.85% |
| Return Year-to-Date | 1.74% |
| Current Price (USD) | 416.77 |
| 52 Week High (USD) | 542.75 |
| 52 Week Low (USD) | 330.05 |
| Financial Year End | December |
| The group saw decent growth in the 1H24, with EPS climbing up 3.2% and total orders increasing 0.9% y/y. Anticipated economic expansion and technical indicators point to further upside ahead. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 14.66 | 16.16 | 17.73 | 19.81 |
| Growth (%) | 10.20 | 9.74 | 11.76 | |
| Dividend Per Share (USD) | 4.84 | 6.05 | 6.74 | 7.66 |
| Growth (%) | 24.98 | 11.42 | 13.69 | |
| Forward PE (times) | 24.16 | 21.73 | 21.04 | |
| Forward Dividend Yield (%) | 1.45 | 1.62 | 1.84 | |
| Earnings growth is expected to be decent in the short-to-medium term. Management is optimistic on growth prospects in 2H24 and remains focused on increasing its footprint in the US and internationally. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | GIS US - Early Exit (Close the position) | GPC US - Stop Loss (Close the position) | HSY US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 69.20 | 143.19 | 192.67 |
| Current | 74.83 | 134.30 | 202.83 |
| Movement | +8.1% | -6.2% | +5.3% |
| We exited the trade early to limit portfolio risk. | The trade breached our stop loss level, and we closed the position. |
Price action remains of interest. Remains above its 200-day simple moving average. Upside momentum supports the strategy.
Our profit target remains at $215 with a trailing stop-loss at $194. Exit the trade by 1 November 2024 |
| Share Name and position | HD US - Buy (Continue to hold) | BALL US - Buy (Continue to hold) | SSY US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 353.79 | 61.71 | 75.19 |
| Current | 370.87 | 64.59 | 78.50 |
| Movement | +4.8% | +4.7% | +4.4% |
|
A developing symmetrical triangle pattern remains of interest. Remains above its 200-day simple moving average. Upside momentum supports the strategy.
Our profit target remains at $395 with a trailing stop-loss at $353. Exit the trade by 11 October 2024. |
Price action remains of interest. Remains above its 200-day simple moving average. Fading downside price momentum supports the strategy.
Our profit target remains at $69 with a trailing stop-loss at $61.60. Exit the trade by 7 February 2025. |
A developing symmetrical triangle pattern remains of interest. Remains above its 200-day simple moving average. Strong upside momentum supports the strategy.
Our profit target remains at $84 with a trailing stop-loss at $75.10. Exit the trade by 6 November 2024. |
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