© Reuters. BMO Capital raises estimates on Domino’s (DPZ) following global deal with Uber (UBER)
BMO Capital reiterated an Outperform rating on Domino’s Pizza Inc (NYSE:) and raised their 12-month price target on the stock to $450.00 (from $395) after the Michigan-based pizza chain announced a global partnership with Uber Technologies Inc ‘s (NYSE:) online food ordering platform, Uber Eats.
Domino’s announced a partnership Wednesday that would allow U.S. customers to order their food through Uber Eats and Postmates marketplaces, with deliveries fulfilled by Domino’s and its franchisees.
Analysts wrote in a note that they believe the “partnership represents a meaningful potential sales driver”, as third-party partnerships are a“proven sales driver that can have multi-year benefits and, in this case, bridge DPZ to a better operating environment in which it can benefit from upcoming operational and technology enhancements.”
The analysts along with BMO believe, based on prior industry examples, that Domino’s partnership with Uber could create a ~5% U.S. sales lift, implying a potential $1+ EPS benefit.
“The proven sales driver can be a multi-year sales tailwind, an encouraging pivot following a period in which we believed DPZ was taking an overly cautious approach in a challenging environment,” they added in the note. “Industry examples suggest potential ~5% U.S. comp lift and, combined with easing input pressures, should add to EPS and drive stronger unit economics.”
Shares of DPZ are up 0.66% in afternoon trading on Thursday.
