2025 E-Commerce Platform And Uber Partnership Will Transform Pizza Delivery

Key Takeaways

• Leveraging new channels, such as Uber and aggregators, and product innovation are key strategies for boosting order growth and revenue.
  
• E-commerce upgrades and operational efficiencies aim to enhance customer experience and optimize costs, driving margin improvement.
  
• Competitive pressures, pricing challenges, and economic headwinds could hinder Domino's market share, international growth, and same-store sales, affecting long-term revenue and profit expectations.

Catalysts

Operates as a pizza company in the United States and internationally.

• Domino's plans to continue leveraging its revamped rewards program and the aggregator channel, such as the partnership with Uber, expecting these channels to drive order count growth and provide a meaningful sales uptick. This is expected to positively impact future revenues.
  
• The introduction of new products, such as New York Style Pizza and Mac & Cheese pasta, along with plans to launch at least two new products yearly, demonstrates a commitment to product innovation. This is likely to boost revenue growth by attracting new customers and increasing order frequency.
  
• Domino's is rolling out a new e-commerce platform in 2025, aimed at enhancing customer experience with improved user interface and functionalities, such as better food photography. This upgrade aims to improve conversion rates and drive digital sales growth, contributing to higher revenues.
  
• The expansion in the aggregator marketplace beyond the Uber partnership is anticipated to unlock a potential incremental sales opportunity of $1 billion over time, significantly boosting Domino's revenue figures.
  
• Improvements in operational excellence through initiatives like the installation of DJ dough stretching machines and service training programs have been reducing delivery times and optimizing store operations. These initiatives are expected to improve net margins by driving efficiencies and reducing costs.

Domino's Pizza Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Domino's Pizza's revenue will grow by 5.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.4% today to 12.5% in 3 years time.
• Analysts expect earnings to reach $696.4 million (and earnings per share of $21.32) by about March 2028, up from $584.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.7x on those 2028 earnings, up from 26.6x today. This future PE is greater than the current PE for the US Hospitality industry at 23.3x.
• Analysts expect the number of shares outstanding to decline by 1.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.52%, as per the Simply Wall St company report.

Domino's Pizza Future Earnings Per Share Growth

Risks

• Increased competitive pressures in the QSR and pizza delivery space could impact Domino's ability to maintain its market share and affect its revenue growth.
  
• Macro and competitive pressures have led to a challenging pricing environment, potentially impacting Domino's net margins as they rely on renowned value strategies.
  
• The slow expansion of the aggregator platform and potential delays in achieving $1 billion in incremental sales could impact long-term revenue projections.
  
• International growth may be hampered by store closures, particularly in Japan, affecting global retail sales and profit expectations.
  
• Economic pressures on lower-income consumers and a potential broadening of demand headwinds beyond this group could continue to pressure same-store sales growth and overall earnings.

Valuation

• The analysts have a consensus price target of $488.37 for Domino's Pizza based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $555.0, and the most bearish reporting a price target of just $414.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.6 billion, earnings will come to $696.4 million, and it would be trading on a PE ratio of 28.7x, assuming you use a discount rate of 8.5%.
• Given the current share price of $452.68, the analyst price target of $488.37 is 7.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.