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

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

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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.

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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.

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