The Domino's Pizza Enterprises Ltd (ASX: DMP) share price could be on the move today after the release of a positive broker note out of Goldman Sachs.
According to the note, the broker has upgraded the pizza chain operator's shares to a buy rating from neutral with a $50.50 price target.
This price target implies potential upside of 20% over the next 12 months excluding dividends.
Why is Goldman Sachs bullish on Domino's?
Goldman upgraded Domino's shares on the belief that it offers a promising growth story due to new store roll outs and strong growth in Japan and the Benelux (Belgium, Netherlands, Luxembourg) regions.
And while the broker has a few concerns over its execution in France, it expects new management and an aggregator partnership to support its growth in that market.
In addition to this, its analysts see a lot of value in the company's shares following their slide over the last 30 days. During this time the Domino's share price has tumbled over 11% due partly to a softer than expected half year result.
What are the risks?
There are a number of downside risks to consider before making an investment. Goldman has pointed to its EBA implementation which is expected to increase costs to around 2% of system sales, the Senate inquiry into Franchise Code, and competition from aggregators such as UberEATS.
Should you invest?
I was a touch disappointed with the company's performance in the first half of FY 2019, but believe it could be worth being patient and holding onto its shares for the long-term for the reasons Goldman outlined. Especially given its long-term plans to almost double its store network in existing territories.
Alternatively, investors could look at KFC and Taco Bell operator Collins Foods Ltd (ASX: CKF). I think it has similarly positive long-term growth potential due to expansion opportunities in European.
