DPZ: Adding Domino's Pizza to Investing Ideas (Short Side)

Shorting both the Dow and Domino's today? Yep. Let's stay with the @Hedgeye Risk Management #Process and make sales when consensus is chasing them on green to #overbought signal levels like DPZ is at today.

On why Howard Penney thinks Domino's (DPZ) is done going up, it’s safe to say that the food delivery space is getting a lot more competitive:

• McDonald’s (MCD) has partnered with UberEats.
• Amazon (AMZN) has entered the space.
• Meanwhile, upstarts like DoorDash and Postmates are attracting serious venture capital funding.

None of this is good news for Domino’s (DPZ). Especially if its biggest rival, Pizza Hut, can get its act together.

When you look at the $1 billion-plus in pizza chain market share shift in the past few years, Pizza Hut has basically ceded all of the market share to Domino’s and Little Caesar’s. Penney doesn't expect this to continue.

“This historical context is important to keep in mind if you’re long Domino’s and you think it’s going to continue with 10 or 11% comps,” Penney says. “Implied in that statement is they’re going to gain more market share.”

Sell green,
KM

Keith R. McCullough
Chief Executive Officer