Papa John’s Hold Rating Maintained Amid Market Volatility and Sales Concerns

In a report released yesterday, Chris O`Cull from Stifel Nicolaus upgraded Papa John’s International (PZZA – Research Report) to a Hold, with a price target of $60.00.

Chris O`Cull has given his Hold rating due to a combination of factors, including his unchanged outlook for the years 2024-2025 and the consideration that current market expectations for Papa John’s International are reasonable. Despite negative sentiment and recent market volatility, O`Cull has shifted his position from Sell to Hold, preferring to adopt a wait-and-see approach. He acknowledges that the company faces significant competition within a tough industry, and his research suggests that domestic comparable sales (comps) are slightly negative, which raises concerns about the brand’s ability to attract domestic franchisees and expand its footprint without more attractive financial terms.

Furthermore, O`Cull points to the importance of comparable sales as a decisive factor for Papa John’s stock price in the coming year. He is keen to understand the company’s strategies for improving same-store sales (SRS) during the first-quarter earnings call. Adjustments to financial forecasts were also made, with a reduction in the FY24 earnings per share (EPS) estimate to account for a slower ramp-up in domestic sales and increased profit pressure on international operations, though somewhat mitigated by reduced general and administrative expenses. Additionally, the 12-month target price (TP) was lowered, reflecting the revised expectations and challenging operating conditions faced by Papa John’s International.

According to TipRanks, O`Cull is a 5-star analyst with an average return of 9.8% and a 56.59% success rate. O`Cull covers the Consumer Cyclical sector, focusing on stocks such as Chipotle, Planet Fitness, and Dutch Bros Inc.

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Papa John’s International (PZZA) Company Description:

Papa John’s International, Inc. operates and franchises pizza delivery and carryout restaurants. It operates through the following segments: Domestic Company-Owned Restaurants, North America Commissaries, North America Franchising, and International Operations. The Domestic Company-Owned Restaurants segment consists of the operations of all domestic company-owned restaurants and derives its revenues principally from retail sales of pizza and side items, including breadsticks, cheese sticks, chicken poppers and wings, dessert items, and canned or bottled beverages. The North America Commissaries segment consists of the operations of regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic company-owned and franchised restaurants in the United States and Canada. The North America Franchising segment consists of franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from franchisees located in the United States and Canada. The International Operations segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from international franchisees. The company was founded by John H. Schnatter in 1984 and is headquartered in Louisville, KY.