Domino's Pizza Enterprises Ltd (ASX: DMP) shares were sold off on Tuesday.
Investors were hitting the sell button again after the ASX 200 pizza chain stock released its half year results.
Given that much of the result was pre-released, the reason for the decline appears to have been its outlook commentary.
Commenting on the result, Goldman Sachs said:
DMP reported 1H25 results in-line with pre-announcement on Feb 7, 2025 and in-line with GSe. 1H25 group network sales of A$2.1B was -2.9% YoY, group revenue of A$1,165 mn was -6.4% YoY and EBIT of A$101mn was -6.7% YoY. Importantly, company reported 1H24/2H24/1H25 EBIT of A$108mn/100mn/101mn, proving effective levers to stabilize EBIT in a difficult topline environment.
Operating Cash was slightly weaker than expected with period end Net Leverage Ratio at 2.44x vs Covenant of 3.0x. Despite the pre-announced result, DMP traded down -10.5% on weaker outlook commentary from management.
Speaking about the ASX 200 stock's outlook commentary, Goldman highlights that the earlier Lunar New Year was to blame. It explains:
Comp sales 2H25 5wks +4.3% softened to 7wks +1.5%: Management noted that this was largely due to shift in timing of seasonal celebrations in Asia (Lunar New Year was 2 wks earlier in 2025 vs 2024). Ex Asia, SSSG run-rate for ANZ and Europe was consistent through the first 7wk period, per management.
Should you buy the dip?
Goldman remains bullish on the ASX 200 stock and thinks that investors should be buying the dip.
This morning, its analysts have retained their buy rating with a slightly trimmed price target of $37.30 (from $38.30).
Based on its current share price of $28.89, this implies potential upside of 29% for investors over the next 12 months.
In addition, it estimates that a 3.6% dividend yield is coming this year and then a 4.5% yield is on the way in FY 2026.
Commenting on its buy recommendation, the broker said:
Reflecting the above, we change our financial forecasts moderately with sales ~0.1% and EBIT +/- ~1.5%. While we agree with the Company's renewed two-pronged focus on SSSG inflection and cost optimization, it is critical for the company to further illustrate a recovery pathway for Japan/France SSSG with clear check-points and timeline to boost investor confidence. DMP is trading at FY26 PE of ~18x vs FY25-27e EPS CAGR of ~19%. Reiterate Buy with new TP of A$37.3/sh (prev A$38.30/sh).
All in all, this could make Domino's a good option for investors that are willing to be patient and make long term investments.
