Domino's Pizza stock is the IBD Stock of The Day as it eyes a buy point and early entry, near a multiyear high. Domino's Pizza saw earnings sharply accelerate in the first quarter and has found key support in recent weeks.
TD Cowen reaffirmed a buy rating on shares of Domino's Pizza in a research note on Thursday, FactSet shows. The firm upped its price target to $610. In fact, more than a dozen analysts hiked their price targets on Domino's stock after the pizza chain delivered strong earnings and guidance on April 29.
Among restaurant peers, McDonald's left the IBD Leaderboard list on Friday to lock in gains after a 31% rally. And Leaderboard peer Cava, a Mediterranean chain, eased on Friday after setting a new high on Thursday, with shares far extended from a buy point.
In addition, Dutch Bros, Wingstop and Texas Roadhouse are all listed on the IBD 50 list of top growth stocks.
Despite inflation, middle-income and upper-tier consumers are driving growth at chains like Cava, Sweetgreen and Chipotle, seen as offering healthier menu options. But it's another story at other restaurants.
Domino's Stock Finds Support Near Buy Point
Shares of the pizza delivery giant fell 0.6% to 521.83 on the stock market today. Domino's stock tested the 21-day exponential moving average Friday, but closed above that level, as well as at its 50-day moving average, while building its current base.
The Domino's stock chart shows a seven-week flat base with a buy point of 542.75, according to MarketSurge pattern recognition. The latest entry also marks a two-year-plus high, set on April 30 after earnings. After a pullback to the 50-day line, shares have rallied in three of the past four weeks, forming the right side of the flat base.
A pullback from the June 12 interim high established a brief downtrend. Investors could treat a break above the downward-sloping trendline as a possible early entry, around 538.44.
On Friday, the retail stock ended the session just 4% below the 542.75 official buy point.
Key Rating Is No. 1 Among 54 Restaurant Retail Stocks
Among other favorable signs, DPZ stock shows an Accumulation/Distribution Rating of A+, which indicates heavy institutional buying. It is the highest A/D Rating among 54 stocks in its industry group.
However, the relative strength line remains well below the consolidation peak. It would be a healthy sign if the RS line catches up with the stock as it tries to break out. That strength indicator has rallied in the past year, a sign of Domino's stock outperformance vs. the S&P 500.
Further, Domino's stock earns a 93 Relative Strength Rating out of a best-possible 99. That is up from 91 four weeks ago. The RS Rating means that Domino's Pizza stock has outperformed 93% of all stocks in IBD's database over the past year.
Year to date, DPZ stock has jumped 27%. It surged 62% over the past 12 months.
Domino's Pizza Earnings Acceleration
Domino's Pizza stock shows a strong 93 Composite Rating out of a best-possible 99. The Composite Rating combines various technical and fundamental metrics into one easy-to-read score.
Domino's stock bears an 87 EPS Rating on the back of an earnings rebound in 2023 and strong earnings acceleration in the first quarter.
On April 29, Domino's Pizza reported that first-quarter earnings grew 22% as sales rose 6%, an overall beat. The company touted higher order and delivery volumes, mostly driven by lower-income consumers. Guidance also came in strong.
Both earnings and sales accelerated sharply from gains of 1% each in the fourth quarter. Domino's managed to buck a downbeat trend for eating out nationwide, with promotions and deals key to driving orders for pizzas and chicken wings among inflation-weary consumers.
On a per-share basis, Domino's Pizza earnings rebounded 17% in 2023 from an 8% decline in 2022, FactSet shows.
Analysts expect Domino's earnings to grow a further 9% in 2024, quickening to a 14% gain in 2025. Sales are seen rising a respective 8% and 7% this year and next year, well above the three-year average of 2.8%.
The 87 EPS Rating for Domino's stock is the eighth highest in its group. Chipotle stock holds the No. 1 EPS Rating and No. 1 Composite Rating among the 54 restaurant retail stocks.
