Domino’s Pizza Delivers a Buying Opportunity

Key Points

• Domino's 2025 guidance caused a dip quickly used as a buying point for many market participants. 
• The outlook isn't as strong as hoped but solid and includes sufficient cash flow to sustain the capital return outlook. 
• The analysts' response is mixed but shows a growing conviction in the consensus price target, a one-year high when reached. 

Domino’s Pizza’s NASDAQ: DPZ stock price action shows a buying signal following the Q4 results and 2025 outlook. The results and outlook align with many of the company’s industry and S&P 500 NYSEARCA: SPY peers in that growth is present but not as robustly as anticipated, causing a reset of expectations.  

Domino’s Pizza's results caused the market to reset its outlook, but the takeaway is that growth is present, margins are strong, and cash flows allow the company to improve its financial position while investing in development and returning capital to shareholders. 

The capital return in 2025 includes a substantial distribution increase that reflects the company’s strengths. The increase is worth 15% to investors, more than triple the pace of inflation, and aggressive increases may be expected in future years.

Domino’s still carries debt on its balance sheet, but the load is dwindling, and the company is on the path to fortress-like conditions. Highlights at the end of 2024 include reduced cash offset by increased assets and a 20% reduction in long-term debt.

Domino’s Gains Leverage in 2024

Domino’s Q4 and 2024 results aren’t robust but reveal core strengths and increasing leverage with market share gains. The $1.44 billion in net revenue is up 2.9% year-over-year, missing the consensus estimate by a slim margin, driven by a 4.4% FX neutral increase in global retail sales and positive comps.

Global retail sales are up on a 2.3% increase in the U.S. and a 6.4% increase Internationally; comparable store sales are up 0.4% in the U.S. and 2.7% internationally, compounded by a 3.7% increase in store count. 

Margin news is good. The company widened its margin on pricing, traffic, and efficiencies driven by the Hungry for MORE strategy. Results include a 6.4% increase in income from operations, a 7.7% increase in net income, a 5.8% increase in net cash, and a 5.5% gain in free cash flow despite increased CapEx. CapEx is up 7.1% on investments in technology, store count, and marketing. 

Guidance for 2025 is good, if not spectacular. The company expects 2025 growth to align with 2024, which will run in the mid-single-digits. While below the long-term targets, the company forecasts normalization in 2026 and will continue to build leverage through store count and marketing until then. 

Analysts Sentiment Firms: Domino’s Pizza to Rise in 2025

The analysts' response to Domino’s results and guidance is mixed, including reiterated ratings and price targets, a downgrade, price target reductions, and price target increases.

However, the net result is that consensus sentiment is unshaken at Moderate Buy, and the range of price targets is narrowing to around $500 to $520. A move to $500 puts the stock at a 1-year high and in easy striking distance of the all-time high, just above $520. 

The takeaway from the analysts' chatter is that improving operational quality and market share gains offset sluggish growth, and the long-term outlook is still robust. It includes an expectation for a high single-digit to low double-digit EPS CAGR beginning in 2026 and lasting until late in the next decade. 

The institutional activity is more supportive of this market. Institutional activity is mixed with selling and buying ramping higher in the second half of 2024 and the first two months of 2025, but buying outpaces selling volume significantly.

This is a strong tailwind for the price action because the institutions own about 95% of the stock. 

Domino’s Pizza Confirms Support and Sets up for Larger Move

The market response to the news is also mixed. Domino’s share price fell initially but quickly regained traction as investors seized the opportunity. The market subsequently confirmed support and advanced to reclaim all losses and set up for a larger movement. The indicators align with an uptrending market and suggest a bullish momentum swing is building.

The market for this stock could rise to set new highs quickly in this scenario and has the potential to set news by year’s end. By then, the market will have a clearer picture of what to expect in 2026.