Domino’s loses its flavour for investment bank

SHARES in Domino’ s Pizza Enterprises have fallen again, plumbing fresh 12- month lows as investment bank Citi joins the legion of analysts turning bearish on the stock.

Citi has put a“sell” recommendation on shares in the pizza group, a former market darling.

In a note to the clients of the investment bank, Citi analyst Craig Wool ford has set a price target of $ 45.50 on t he stock — a long way from its price t his morning of $ 52.38.

Its shares hit a high of just under $ 77 last year.

Mr Woolford said t he price of Domino’s shares t o shrink t o 23 t i mes t he group’s earnings per share, compared with a price- to- earnings ratio of 30 now.

Sales and earnings growth sl ow were also l i kely t o sl ow, he said.

Mr Woolford warned Domino’s had t aken its share of t he profit pool as f ar as i t could realistically go.

The prospect of f urther acquisit i ons was l ow and growth i n store numbers would l i kely result i n some l oss of sales productivity, he warned.

Mr Woolford’s reasons f or his bearish view on Domino’s stem f rom an expected push back f rom f ranchise operators demanding a bigger sl i ce of earnings, growth limitations in the Australian market and headwinds from its push i nto Europe.

The group’s t arget for its earnings before i nterest, t ax, depreciation and amortisation margin would “not be met because Domino’s will need t o provide more incentive for franchisees to join t he network”, especially i n Australia and New Zealand, he said.