Domino's Pizza franchise projection falls short of analyst expectations, driving downgrade

Domino's Pizza Inc. was downgraded to market perform from outperform at Cowen after the pizza chain's franchise projection fell short of analyst expectations. Cowen cut its price target to $390 from $480. Cowen referred to a Domino's Franchise Disclosure Document in which Domino's "implicitly projects 218 gross U.S. franchise openings in 2022," below Cowen's previous expectation for 318. "Importantly, it appears that Domino's growth algorithm will rely more heavily on international growth, which carries ~60% of the sales volumes and ~50% of the royalty rate vs U.S. stores," analysts said. Franchising has proven to be an attractive business model despite recent headlines. Cowen analysts say they are still confident about Domino's long-term story thanks to digital and other advantages. Domino's stock has plunged 29% for the year to date, but is up 7.8% over the last year.

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