Domino's Pizza shares eye buy point as profits accelerate


Domino's Pizza

Domino's Pizza

DPZ


$7.39



1.41%



twenty three%

IBD Stock Analysis

  • A buy point for the flat base is 542.75. Early entry is possible at 538.44.

comprehensive evaluation

Industry Group Ranking

Appearance pattern

Flat Base

*Not real-time data. All data displayed was taken on June 21, 2024 at 1:17 PM EDT.

Domino's Pizza stock, with a buy point and early entry near multi-year highs, is IBD's Stock of the Day. Domino's Pizza DPZ saw revenue accelerate sharply in the first quarter and has found significant support in recent weeks.

TD Cowen reaffirmed its buy recommendation on Domino's Pizza shares in a research note on Thursday. The firm raised its price target to $610, according to FactSet. In fact, more than a dozen analysts raised their price targets on Domino's Pizza shares after the pizza chain reported strong earnings and outlook on April 29.

In the restaurant industry, McDonald's(MCD) fell off the IBD Leaderboard list on Friday, locking in gains after a 31% rally. Kava Mediterranean restaurant chain CAVA hit a new high on Thursday before falling on Friday as its shares moved well away from a buy point.

In addition, Dutch Brothers (Brothers), Wingstop (Wing) and Texas Roadhouse (TXRH) are all featured on the IBD 50 list of top growth stocks.

Despite inflation, middle- and upper-income consumers are driving growth for chains such as Cava. Sweet Green (SG) and chipotle pepper (CMG) is seen as offering healthier menu options, but it's a different story at other restaurants.

Domino's Shares Find Support Near Buy Point

Shares of the pizza delivery giant fell slightly on the stock market today. Domino's shares dipped slightly below their 21-day exponential moving average on Friday but maintained support at that level and at their 50-day moving average within a flat base into which they are building their current base.

Domino's stock chart shows a seven-week flat trend with a buy point of 542.75, according to MarketSurge Pattern Recognition, and the most recent chart shows the stock hitting a more than two-year high after the company released earnings on April 30. After falling to its 50-day line, the stock has risen in three of the past four weeks, forming the right side of the flat trend.

A short-term downtrend has been established by the pullback from the intermediate high of June 12. Investors can view a breakout above the trendline drawn at the high of that trend as a possible early entry near the 538.44 area.

On Friday, the retail stock was trading just 3% below the official buy point of 542.75.

Key Ratings ranks #1 among 54 restaurant retail stocks

In other positive signs, DPZ stock has an accumulation/distribution rating of A+, indicating significant buying by institutional investors, the highest A/D rating among the 54 stocks in its industry group.

However, trading volume is light within the flat base. Also, the relative strength line is well below the consolidation peak. It would be a healthy sign if the RS line were to catch up with the stock as it tries to break out. This strength indicator has been rising over the past year, indicating Domino's stock is outperforming the S&P 500.

Additionally, Domino's Pizza shares received a Relative Strength Rating of 93 out of a possible 99. This is up from a rating of 91 four weeks ago. The RS Rating means that Domino's Pizza shares have outperformed 93% of all stocks in IBD's database over the past year.

DPZ shares have risen 27% so far this year and 62% in the past 12 months.

Domino's Pizza's revenues accelerate

Domino's Pizza stock has a strong Overall Rating of 93 out of a possible 99. The Overall Rating combines a variety of technical and fundamental indicators into one easy-to-read score.

Domino's stock has an EPS rating of 87 on the back of an earnings recovery in 2023 and strong earnings acceleration in the first quarter.

Domino's Pizza reported on April 29 that its first-quarter profit rose 22% and sales rose 6%, beating expectations overall. The company touted rising orders and delivery volume, driven mostly by lower-income customers. It also provided strong guidance.

Both profit and sales rose sharply from a 1% increase in the fourth quarter. Domino's was able to buck a national trend of declining dining out, with promotions and sales key to encouraging inflation-weary consumers to order pizza and chicken wings.

Domino's earnings per share are expected to fall 8% in 2022 before recovering 17% in 2023, according to FactSet.

Analysts expect Domino's profits to grow another 9% in 2024 and accelerate to 14% growth in 2025. Sales are expected to grow 8% and 7% this year and next, respectively, well above the 2.8% average over the past three years.

Domino's stock has an EPS Rating of 87, the eighth-highest in its group, while Chipotle stock receives the No. 1 EPS Rating and Composite Rating among 54 restaurant retail stocks.

With restaurant stocks making notable moves, three stocks are attracting attention: Domino's Pizza stock, Cava & Coffee chain. Dutch Brothers (BROS) — can be found on IBD SwingTrader.

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