We are adding DPZ to the best idea long list.
Two weeks ago, we revamped our Position Monitor and reinstated a bias list of which DPZ became a long bias. We are elevating DPZ to a best Idea LONG, and on Monday, October 24th at 12:30, we will run through our thoughts on why DPZ is now the best idea long.
DPZ traded +10.4% following DPZ's 3Q22 print, with SSS outperforming; revenue in-line, but EPS missed by (6%). With the stock down 40% YTD (underperforming the S&P 500 by 21%), the concerns are well known, but incremental fundamental improvements are not priced in. Despite the stock's positive response on the earnings day, the sell-side tended to come away from the earnings print mixed, focusing on the persistent inflation/margin headwinds that led to the EPS miss. DPZ is a great business model, and some trends will make it into a more upbeat narrative in the next 6-12 months, including:
- A sequential improvement in driver staffing
- The company also announced it raised the Mix & Match carry-out by $1 to $6.99 in mid-October, allowing margins to improve as headwinds start to lessen.
- Comps can accelerate more than current estimates imply.
More details to come.