Domino's downgraded by Berenberg over pressure from delivery rivals
Analysts expect negative earnings growth this year.
Domino's Pizza Group, the master franchisee of the pizza chain in the UK, will face mounting pressure from competitors that are more focused on growth and less on returns, according to analysts from Berenberg.
“We do not think Domino’s Pizza is a bad business: it has a strong brand, solid returns on capital, and is well rated by its customers,” analysts at the bank said in a note.
Citing competitive pressures, the analysts expect negative earnings growth in 2020 and “lacklustre” thereafter.
Competition from smaller independent pizza restaurants is expected to grow due to the effects of coronavirus lockdown boosting demand for third-party aggregators such as Just Eat Takeaway, UberEats and Deliveroo.
“We struggle to justify the size of the stock’s current valuation gap versus most leisure peers,” the analysts added, downgrading the recommendation to ‘sell’ and kept the price target at 250p.
