MENU

Why Domino’s Pizza Enterprises Ltd. (ASX:DMP) fortunes could be tied to the FIFA World Cup

The upcoming soccer world cup that kicks off next week in Russia could score a big goal for Domino’s Pizza Enterprises Ltd. (ASX: DMP) that could give its share price another boost.

Shares in Domino’s are already in recovery mode with the stock adding 2.1% to $53.84 this morning – taking its three-month gains to an impressive 35% when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is barely 1% ahead.

There’s still room left for the stock to run ahead too and the outcome from the 21st FIFA World Cup could deliver a nice earnings surprise for the ASX-listed Domino’s as it owns stores in a number of European countries.

“We believe a solid European result is key to DMP hitting FY18 guidance for ~20% NPAT growth (~18% including buyback),” said UBS.

“To assess the opportunity, we have looked at the impact of past major world football events as an indicator for the upcoming Russian tournament.”

The broker believes the world cup is a positive for pizza sales but the real kicker would depend on the performance of the French and German teams, as well as the weather.

No prizes for guessing which European countries our Domino’s is in and UBS is becoming increasingly confident that management will meet its ambitious profit target.

This target has been a point of contention as many experts didn’t believe the company could achieve this when it was announced a few months ago.

This has been a key factor behind traders shorting the stock and Domino’s is the second most shorted company on the ASX, according to the latest data from ASIC which is always a week behind.

The performance of its European division is key to Domino’s near-term share price performance. UBS estimates that sales in the EU will contribute to around half of management’s expected net profit growth target in the current half of this financial year.

But Domino’s isn’t without risks. There’re ongoing worries about the impact of aggregators like Uber Eats and Deliveroo on the business.

Domino’s used to have a big edge over other fast food due to its advanced delivery system but aggregators have levelled that playing field and has even allowed small mum-and-dad pizza joints to reach the delivery market.

Having said that, I think Domino’s looks to be a better bet than its peers, which includes multi-brand franchisor Retail Food Group Limited (ASX: RFG) and Kentucky Fried Chicken franchisee Collins Foods Ltd (ASX: CKF).

If you are looking for other stocks with near-term upside, you might be keen to read the latest free report from the experts at the Motley Fool.

They have picked their three favourite blue-chip stocks for 2018 and you can find out what these stocks are by clicking on the free link below.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.