Top broker Ord Minnett has upgraded its rating on Domino's Pizza Enterprises (ASX: DMP) shares and has a 12-month price target of $28.
While the price target was cut from $31 previously, the broker upgraded its rating on Domino's Pizza shares from a hold to a buy.
The broker said the company's recently smashed valuation following news of the CEO's resignation made it a buy-the-dip opportunity.
Let's look into this further.
Domino's Pizza share price could rise 54%, says broker
The Domino's Pizza share price closed at $18.17 on Friday, down 1.52% for the day.
Therefore, Ord Minnett's new 12-month target implies a potential 54% upside for investors from here.
The ASX 200 consumer discretionary share lost a quarter of its value in one day in early July after the company announced that CEO Mark van Dyck would be leaving his post after less than a year in the role, and in the middle of a structural revamp for the company post-COVID.
The Domino's Pizza share price crumbled by 26% to a 52-week low of $14.80 as the market reacted to van Dyck's impending departure.
He only took over as CEO in November 2024 upon the retirement of Don Meij, who had run Domino's Pizza for 22 years.
Domino's chair and largest shareholder, the Canadian-born billionaire Jack Cowin, has stepped up to the plate as executive chair on an interim basis to run the company while they look for a new CEO.
Cowin is famous for founding Hungry Jack's and growing it from one store in Perth in 1971 to a more than 440-store network today.
Hungry Jacks is owned by Cowin's company, Competitive Foods Australia, where he remains the executive chair.
In a statement, Domino's Pizza said van Dyck has "reset core market business plans to improve topline performance, closed 205 underperforming stores (Japan, Europe, ANZ), removed low ROI spend and drove procurement excellence".
Cowin said Domino's new strategic foundations were "now firmly in place".
This includes raising franchisee profitability, simplifying operations, identifying and implementing cost savings, and improving execution.
Cowin said he will collaborate with van Dyck and the executive team over the coming months.
What did Ord Minnett say?
In a new note published last Thursday, Ord Minnett described van Dyck's departure as "puzzling".
The broker commented:
Domino's Pizza Enterprises announced the surprise exit of CEO Mark van Dyck, effective in December, despite him only taking the top job in November last year.
Veteran fast-food tycoon Jack Cowin, Domino's major shareholder, will become executive chairman until a new CEO is appointed.
This suggests to Ord Minnett that the turnaround job at the fast-food chain may be a much larger task than Van Dyck – and the market – expected, despite what appeared to be the CEO's apparent rapid progress in resetting the business, e.g. the closure of 205 loss-making stores in Japan and Europe.
It may well be that Cowin, who made his fortune with the Hungry Jack's franchise, did not see changes to the business being deep enough or implemented fast enough.
Nonetheless, it is a puzzling decision given Van Dyck appeared to be a 'captain's pick' by the chairman after his earlier consulting work with Domino's.
What's next?
Ord Minnett has reworked its Domino's model in a "major way".
The broker expects little to no network growth and a slowdown in same-store sales growth as the company focuses on margins and profitability.
The broker also forecasts no final dividend for FY25 and no payments in FY26.
Ord Minnett raised its rating on Domino's Pizza shares from hold to buy due to today's attractive price, but cut its 12-month target.
The broker concluded:
We have trimmed our FY25 EPS estimate by 0.6%, while our FY26 and FY27 forecasts fall by 1.1% and 5.9%, respectively, leading to a cut in target price to $28.00 from $31.00.
We have raised our recommendation to Buy from Hold given the very attractive value now on offer.
