I think it is fair to say that Domino's Pizza Enterprises Ltd (ASX: DMP) shares have been having a tough year.
For example, on Friday the pizza chain operator's shares ended the week at $60.87, which is just a fraction higher than their 52-week low.
Time to buy Domino's shares?
One broker that believes investors should be seizing on this weakness is Morgans.
According to a recent note, the broker has recently retained its add rating but trimmed its price target on the company's shares slightly to $90.00.
Based on where Domino's shares are trading today, this implies potential upside of almost 50% for investors over the next 12 months.
And with the broker expecting a $1.73 per share partially franked dividend in FY 2023, this adds a further 2.8% yield to the equation.
What did the broker say?
Morgans acknowledges that the last 12 months have been difficult for the company. However, it appears confident that the worst is over and "it will get better from here."
The broker highlights that price increases and operating efficiencies should help offset inflationary pressures. It explained:
Higher prices, operating efficiencies and menu enhancements are already allowing DMP to offset cost inflation in ANZ and Asia. It's been slower in Europe, but it appears progress is being made. With the prospect of some relief in commodity price inflation and reduced losses in Denmark, we expect margins to rise in FY23.
In light of this, Morgans is forecasting double digit earnings growth in both FY 2023 and FY 2024. It commented:
The transition out of COVID-19 tailwinds and into an environment of inflationary pressure and reduced consumer confidence made FY22 a challenging year for Domino's Pizza. EBIT fell by 10.5% as both Asia and Europe reported reduced margins and same store sales growth. We believe it will get better from here. We forecast 12.9% EBIT growth in FY23, followed by 19.5% growth in FY24.
All in all, its analysts appear to see this as the potential turning point for Domino's shares.
