The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is swapping hands at $36.48 apiece in late afternoon trading on Wednesday.
The past year of trade has been challenging for Domino's.
Its share price is down 23% in the past 12 months. It recently nudged 52-week lows of $36.24. And it is trading 38% lower this year to date.
Despite the challenges, a number of analysts believe shares in the pizza company have the potential to rise by 22%.
Let's dive into why this ASX stock is catching analysts' eyes and why investors should take note.
Why could Domino's share price increase?
Analysts at investment bank Citi upgraded their view on the pizza giant in a recent note, according to The Australian.
The broker upgraded Domino's to a buy rating with a target price of $44.50. If Citi's analysis proves accurate, that's a share price surge of 22%.
Analyst Sam Teeger said Citi was "cautiously optimistic" about Domino's prospects for FY 2025 following the company's investor tour in France.
According to Teeger, the company has struggled recently but "better days could be ahead" for the beloved pizza chain. This optimism spurred the upgraded rating.
Spotlight on share price
Citi isn't the only broker that is bullish on the Domino's share price. Ord Minnett also believes Domino's has major upside potential.
The broker has an accumulate rating and a price target of $44.40 on Domino's shares, implying a similar increase from the current price.
This optimistic outlook is based on expected growth in sales and earnings as the company adapts to changing consumer preferences and market conditions.
But despite the broker optimism, Domino's share price has slipped 4% into the red this past month. What gives?
Why Domino's shares are moving sideways
Domino's share price briefly rose following the Federal Budget announcement earlier in May. According to my colleague James, the government's plans to increase disposable income could boost consumer spending, benefiting Domino's sales in Australia.
However, there are risks to consider in this investment debate. Morgan Stanley analysis suggests that the rising popularity of appetite-suppressing drugs like Ozempic could potentially impact the consumption of high-calorie foods (hint: pizza).
The broker estimates that "ice cream, cakes, cookies, candy, chocolate, frozen pizzas, chips, and regular sodas could see 4% to 5% reductions in consumption by 2035".
"Quick service restaurants with a focus on unhealthy food items, including fried chicken and pizza, present with greater risks from a consumption standpoint," it added in its report.
This could pose a challenge for Domino's, as the fast food industry might face reduced demand for items like pizza, according to the broker.
Foolish takeaway
If Citi and Ord Minnet are right, Domino's might present as a promising investment opportunity.
With both brokers predicting a 22% rise in the share price, it could be wise to watch this name. As always, however, stay mindful of the potential risks and do your research.
