With eight consecutive quarters of growth, Papa John’s International (PZZA) has successfully turned around its business. Product innovation, targeted marketing, and customer growth and retention are the reasons behind Papa John’s turnaround. I have a Bullish outlook on PZZA stock.
Notably, Papa John’s strong digital capabilities and partnerships with multiple delivery aggregators helped it capitalize on the higher demand for pizza delivery amid the pandemic-led restrictions. This is important, as transactions delivered by aggregators are “highly incremental and profitable” to its business, according to Rob Lynch, CEO of Papa John’s.
Thanks to its strong financial and operating performance, Papa John’s International shares have increased over 52% this year and handily outperformed the Nasdaq composite index. (See Papa John’s International stock charts on TipRanks)
Taking a note of the continued strength in its business, Nick Setyan of Wedbush stated that Papa John’s Q3 comparable sales growth is trending higher than expectations. Highlighting the benefits from its menu innovation, digital growth, and loyalty program, Setyan raised his Q3 and Q4 comparable sales growth estimates for North America.
Papa John’s focus on menu innovation has been a key enabler of its growth. Indeed, Lynch said during the Q2 conference call, “We continue to see the long-term benefits of our strategy around creating premium differentiated new menu platforms.”
It’s worth noting that its Epic Stuffed Crust gained immense popularity among customers and is one of the reasons behind the growth in its ticket and traffic during the first two quarters of 2021.
Further, to accelerate its growth, Papa John’s recently announced two development deals. (Read more: Papa John’s Announces Largest Domestic Franchisee Development Agreement; Shares Pop 2.5%)
In response to these deals, its CDO (chief development officer) Amanda Clark said, “Papa John’s development flywheel has started to take off.”
Expecting the company to command a higher valuation multiple over time, Setyan maintained a Buy rating on Papa John’s stock and increased his price target to $140 (9.1% upside potential) from $130.
On TipRanks, PZZA stock has an analyst rating consensus of Strong Buy, based on 9 Buys and 2 Holds. The average Papa John’s International price target of $131.45 implies 2.5% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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