The Domino's Pizza Enterprises Ltd (ASX: DMP) share price has been out of form this week.
The pizza chain operator's shares have come under pressure following a soft update from its U.S. parent.
That update revealed that the U.S. based pizza giant posted only a 1.7% lift in international same-store sales during the most recent quarter. This was well short of the ~2.9% consensus estimate.
Another disappointment was that the U.S. Domino's doesn't appear optimistic that the performance of its international operations is going to improve in the near term. As a result, it has downgraded its international same store sales growth target over the next 3-5 years. It is now targeting growth of 1% to 4% growth, rather than 3% to 6% growth.
This appears to have sparked fears that the locally listed Domino's will downgrade its own same store sales growth targets to be in line with its parent. At present it is targeting 3% to 6% growth over the period.
Goldman remains positive on Domino's.
One broker that doesn't appear concerned by this development is Goldman Sachs.
According to a note out of the investment bank this morning, its analysts have reiterated their conviction buy rating and lifted the price target on its shares by 7% to $55.30. This price target implies potential upside of ~16% based on its last close price.
Goldman said: "We attended DMP's Investor Day held on 10th of October 2019. Management reiterated their confidence in long term growth in all key regions that DMP operates and continue to show increased optimism around short term execution in areas like store expansion."
In respect to the much talked about aggregators threat, Goldman isn't concerned. It said: "After comparing different markets and models and conducting channel checks with industry participants in this note. The bottom line is that the net impact for DMP is mixed, given a combination of positive and negative factors."
And finally, Goldman doesn't expect Domino's to downgrade its same store sales targets to be in line with its parent.
It explained: "When comparing DMP's outlook for SSS growth of 3-6% against the recently revised international sales guidance at DPZ of 1-4%, DMP noted the greater greenfield store expansion potential across their portfolio supported the stronger SSS outlook."
In light of this, it remains bullish on Domino's and believes its shares are in the buy zone today.
Should you invest?
Whilst I do have a few concerns following the Domino's U.S. update, I agree with Goldman. Overall, I think its expansion plans make it a good buy and hold option for investors along with Collins Foods Ltd (ASX: CKF).
Though, if history is a guide, it may be a bumpy ride for shareholders.
