Should I buy Domino's shares before the New Year?

Are Domino's shares a good buy for 2025 after tumbling 50% in 2024?

| More on:
domino's pizza share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Domino's Pizza Enterprises Ltd (ASX: DMP) shares have broadly been in a downtrend since roaring to closing highs of $161.98 each in September 2021.

The S&P/ASX 200 Index (ASX: XJO) fast food pizza retailer was among the major beneficiaries of COVID-19 lockdowns. After all, if you can't take the family out to eat at your local restaurant, then why not bring the local restaurant to you?

But as dining-out options returned, profits and revenue began to decline.

The company has also struggled to achieve sustainable growth in some of its international markets, including Japan.

Created with Highcharts 11.4.3Domino's Pizza Enterprises PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 201016 Dec 2024Zoom ▾20102012201420162018202020222024201020102015201520202020www.fool.com.au

Yesterday, Domino's shares enjoyed a welcome day of outperformance, closing up 0.75% at $29.67 apiece.

Still, that sees the pizza retailer's shares down 48% since this time last year. Though that doesn't include the $1.06 a share in fully franked dividends eligible stockholders will have received over this time.

Despite that big fall, a significant number of investors are betting the stock will drop further.

Domino's started this week as the seventh most shorted share on the ASX, with a short interest of 11.1%.

So, are the short sellers right, or does Domino's stock now represent a long-term bargain buy?

Let's see what the experts are saying.

Are Domino's shares set to rebound in 2025?

"Recent sales have lagged internal targets, possibly hinting at slower short-term growth," said Bell Potter Securities' Christopher Watt, who has a hold recommendation on Domino's shares (courtesy of The Bull).

On the positive front, Watt added:

However, there is room for cautious optimism led by a new chief executive officer. In our view, cost controls, more efficient media spending and aggregator partnerships could support earnings before interest and tax margin targets of between 10% and 12%.

On 5 November, the company reported that its long-standing CEO, Don Meij, was stepping down after 22 years in the top position. Mark van Dyck took over as CEO on 6 December. Meij will remain with the company for another year through the transition period.

But Watt isn't ready to issue a buy recommendation on Domino's shares just yet.

"Near-term uncertainty suggests a wait-and-see approach," he said.

Goldman Sachs optimistic on the new management

Following van Dyck's appointment, Goldman Sachs issued a fairly bullish assessment of its outlook for Domino's shares.

According to the broker:

While Mr van Dyck does not have a QSR background, we expect his near three decades experience at both Coca-Cola Enterprises and Compass Group as a professional executive will bring much-needed system management and planning capabilities to enable more precision execution and risk management of DMP across its 12 markets.

We expect such capabilities to include more efficient organisation and incentive structures, financial planning and capital allocation discipline, cost and supply chain optimisation, revenue management and marketing/promotional effectiveness.

Appointing a CEO from outside the company also suggests the board's determination to disrupt DMP's existing ways of working and inject new thinking.

Goldman Sachs has a buy rating on Domino's shares with a $39.10 12-month target price. That represents a potential upside of 32% from Monday's closing price.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Domino's Pizza Enterprises and Goldman Sachs Group. The Motley Fool Australia has recommended Domino's Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A square ballot box with an envelope going in it sits on a blue keyboard key that says 'vote'.
Consumer Staples & Discretionary Shares

Own Star Entertainment shares? Last chance to vote on 'only lifeline' left for company

Independent expert says terms of Bally's takeover unfair but the 'only lifeline' left for Star Entertainment.

Read more »

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.
Consumer Staples & Discretionary Shares

How much upside does Macquarie expect for Lottery Corporation shares?

This ASX 200 stock has proven resilient through various economic conditions.

Read more »

A smiling man take a big bite out of a burrito
Consumer Staples & Discretionary Shares

Fundie says Guzman Y Gomez share price 'looks highly attractive'. Here's why

Blackwattle Investment says Guzman Y Gomez's current valuation and risk/reward profile looks very appealing.

Read more »

a bearded man with a big smile wearing a bright red apron holds a knife in one hand and a big slab of cheese in the other as though he is about to slice it.
Consumer Staples & Discretionary Shares

What's the upside for Bega shares according to Macquarie?

This broker sees room to grow for this Aussie consumer staples company. 

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

How much upside does Macquarie see for Collins Foods shares?

The company is scheduled to report on 24 June.

Read more »

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price.
Broker Notes

JP Morgan upgrades Domino's Pizza shares

Does the broker expect things to turn around?

Read more »

A block of cheese with grated cheese on top.
Consumer Staples & Discretionary Shares

Macquarie expects 20% upside for this ASX All Ords consumer staples stock

This week, Macquarie initiated coverage on Bega Cheese with an outperform rating.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Consumer Staples & Discretionary Shares

Why are Cettire shares crashing 27% today?

Things aren't looking good for this online luxury products retailer.

Read more »