JPMorgan thinks Domino’s stock is trading at a discount compared to what the company charges for key products. The firm upgraded Domino’s to overweight from neutral on Thursday with a $360 price target, up from $340, representing potential 24% upside from the $289.85 close on Wednesday. Domino’s stock is down 16.3% since the start of 2023. DPZ YTD mountain Some pressure on Domino’s stock so far this year isn’t swaying JPMorgan’s upgrade to overweight. A JPMorgan downgrade of Domino’s in the summer of 2021 “has ‘played out’ and a fresh look at estimates shows the stock as too cheap for what is a structurally low cost delivery at $6.99 for a medium 2-topping and take-out provider for a $7.99 3-topping large pizza,” analyst John Ivankoe said. Ivankoe added that Domino’s franchisees don’t have many reasons to decide to close stores, given that the average U.S. franchise owner oversaw 7 stores with roughly $140,000 each in free cash flow in 2022, which is only marginally lower than about $143,000 per store in 2019. “We also do not believe any of them require the company’s financial assistance as seen at other quick service chains, meaning the revenue and FCF base at DPZ remains intact,” he added. — CNBC’s Michael Bloom contributed to this report.
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