Domino’s Pizza (NYSE:DPZ) shot higher in early trading on Monday after Baird upgraded the pizza stock to an Outperform rating after having it slotted previously at Market Perform. Analyst David Tarantino said the firm’s confidence level in the fundamental outlook for Domino’s (DPZ) is rising, and sees a more appealing risk-reward profile.
“Specifically, we are optimistic the company’s Hungry for MORE strategy can fuel a multi-year stretch of standout top-line performance,” he noted. Looking ahead, Tarantino said there is continued evidence of strong fundamentals for DPZ in the upcoming quarters that is anticipated to support premium valuation metrics on the stock and support more share price gains. Tarantino also pointed to positive factors such as DPZ’s advertising approach, product pipeline, operations, rising penetration, and improved relative value proposition.
“With visible sales drivers, a positive unit development outlook, and a highly franchised business model, DPZ has a profile that fits well with the type of businesses that, we think, are attractive to own amid ongoing uncertainties about the health of consumer spending,” summarized Tarantino.
Shares of Domino’s Pizza (DPZ) were up 1.72% in premarket action to $502.20. Domino’s (DPZ) is lined up to report Q2 earnings on July 18. While the company has beat EPS estimates in six of the last seven quarters, it has fallen short of revenue estimates in five of the last six quarters. Options trading implies a share price swing of 5% after the earnings report is released.