Among pizza delivery franchises, Domino’s (NYSE:DPZ) is one of the biggest names around. Yet Domino’s is down in Friday afternoon trading as analysts reconsider their positions, and delivery starts to seem oddly troublesome for a company that built its name on the concept. Multiple analysts downgraded their positions on Domino’s, including David Tarantino with Robert W. Baird. Tarantino noted both the weak guidance the chain issued and its lackluster comparable-store sales figures as reasons to dial down the stock to “neutral” from his original stance of Buy.
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Jon Tower with Citigroup, meanwhile, also downgraded Domino’s to a Hold. One of the biggest issues facing delivery pizza is, perhaps most surprisingly, the delivery concept. Since delivery fees are set by individual stores and franchise locations, most customers may not believe that delivery is worth the extra fees. Since food prices are going up almost universally, delivery fees added only really add insult to injury.
However, Domino’s itself suggested that delivery problems stemmed from a shortage of delivery drivers early last year. That would suggest the problem may be about to turn itself around. However, the next earnings report may point out potential flaws in that argument. Domino’s already embarked on some solutions meant to address the shortfall. Among these were external call centers designed to better field calls and place to-go orders rather than delivery.
Though the firm is having trouble right now, it still enjoys analyst support. Current analyst consensus calls Domino’s a Moderate Buy. With an average price target of $349.33, Domino’s stock comes with 15.71% upside potential.
