New Product Launches And International Expansion Will Boost Market Share In 2025

Key Takeaways

• Expansion into aggregator channels and upgraded e-commerce platforms are poised to significantly enhance sales growth and improve margins.
  
• International growth strategies in high-potential markets are expected to drive global retail sales, improving revenue amidst challenging economic conditions.
  
• Competitive pressures, economic challenges, and strategic shifts could hinder Domino's revenue growth and market share, with risks to store profitability and international expansion.

Catalysts

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

• Domino's is focusing on market share gains as a measure of success in a value-driven QSR marketplace, with a value strategy that is planned to continue in 2025. This could potentially increase revenue and enhance net margins due to higher volumes.
  
• The introduction of new products, such as the New York Style Pizza and Mac & Cheese pasta, with plans for at least two new products annually, emphasizes product innovation that could increase revenue through diversification and consumer interest.
  
• Expansion into the aggregator channel with Uber is seen as a significant catalyst for sales growth, with an anticipated incremental sales opportunity of $1 billion over time. This could have a substantial impact on future earnings.
  
• Domino's upgraded e-commerce platform, which is set to rollout in 2025, aims to improve consumer experience, potentially increasing conversion rates and boosting online sales, thereby positively affecting revenue and margins.
  
• Continued international growth, especially in high-potential markets like China and India, is expected to continue contributing to global retail sales growth, enhancing overall revenue and earnings despite macroeconomic pressures.

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 $696.2 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 28.6x on those 2028 earnings, up from 27.7x today. This future PE is greater than the current PE for the US Hospitality industry at 23.9x.
• 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 8.48%, as per the Simply Wall St company report.

Domino's Pizza Future Earnings Per Share Growth

Risks

• The shift towards carryout, which carries a lower ticket than delivery, could negatively impact average store profitability, affecting net margins and earnings.
  
• Ongoing macroeconomic challenges, particularly affecting low-income consumers, could continue to pressure delivery sales, impacting overall revenue growth.
  
• There are competitive pressures from QSR peers offering significant value propositions at lower price points, which may erode market share and impact Domino's ability to grow revenues.
  
• The closure of underperforming stores internationally, particularly by DPE in Japan, presents a risk to international net store growth and global retail sales contributions.
  
• Delays or inefficiencies in the rollout of new products or technology platforms could hinder revenue growth if these initiatives do not connect with consumers as expected.

Valuation

• The analysts have a consensus price target of $486.907 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 $696.2 million, and it would be trading on a PE ratio of 28.6x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $472.05, the analyst price target of $486.91 is 3.1% 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.