Why Domino’s Pizza Enterprises Ltd (ASX:DMP) shares are flying high today

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The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has been a big mover on Friday.

In early afternoon trade the pizza chain operator’s shares are up 5.5% to $51.86. This means its shares have now risen an impressive 22% since this time last month.

Why are Domino’s shares on the rise today?

With no news out of the company, today’s gain appears to be related to a broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk.

That note reveals that the leading broker has upgraded the pizza chain operator’s shares to an outperform rating from neutral with an increased price target of $55.00.

According to the note, its analysts have made the move after judging that the headwinds it faced in achieving its full-year guidance have softened.

While the broker acknowledges that the weak first half result means the company needs to deliver an exceptionally strong second half, it feels it could achieve this thanks to a stronger than expected performance from its European segment.

In addition to this, it believes the upcoming World Cup is likely to support the business in the final weeks of the financial year.

Should you invest?

While I do think that Domino’s shares are approaching fair value now following their strong recent gains, I still believe the company would be a great long-term investment.

This is due to management’s bold plan to more than double its store footprint over the next seven years and use its scale, technology, and efficiencies to improve its already wide margins. If this is a success, I believe it could lead to double digit profit growth for the next decade.

In light of this, I think it is one of the best options for investors in the food industry alongside KFC operator Collins Foods Ltd (ASX: CKF) and healthy food and UHT company Freedom Foods Group Ltd (ASX: FNP).

 

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
James Mickleboro
James Mickleboro studied economics in the United Kingdom before coming to Australia and landing a job at a fund manager. He is part of the CFA Institute's Chartered Financial Analyst program. He loves researching and writing about Australian equities.