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Analyst Hungers For Papa John's, Would Bite At Wingstop On A Pullback

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Analyst Hungers For Papa John's, Would Bite At Wingstop On A Pullback
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Stephens said in a note released on Friday that it likes Papa John's Int'l, Inc (NASDAQ: PZZA) for its international opportunity and profit and loss leverage in an improving economy. The firm also said it would become more constructive on Wingstop Inc (NASDAQ: WING) on a pullback.

Consumer Placing Value On Convenience

Analyst Will Slabaugh said he sees consumer continuing to place a higher value on all forms of convenience in the coming years. Accordingly, the analyst expects those companies that are best positioned in delivery, to-go, speed of service, etc. to be outsized share takers.

Stephens is of the view that Papa John's, Wingstop and Domino's Pizza, Inc. (NYSE: DPZ) are all well positioned where the consumer is going. The firm attributed each concept's outperforming same-store sales growth to its leadership in two or more of the following: technology, delivery and to-go.

Papa John's International Opportunity

Stephens prefers Papa John's for the international opportunity, as it has 1,560 stores internationally compared to 8,000, plus, for Domino's. While noting that the former's international unit growth is estimated at 9 percent in 2016, the firm said it expects growth to continue or accelerate on strong economics and same store sales growth. Given Papa John's larger company-owned mix, the firm sees more opportunity for outperformance in its domestic segment in a strong or improving comp environment.

Valuation Concerns For Domino's

According to Stephens, Domino's is the best-in-class or most forward thinking. Outside of Starbucks Corporation (NASDAQ: SBUX), the firm believes Domino's remains ahead of peers from a technology, infrastructure and gross international store growth standpoint. However, the firm is uncomfortable with valuation, as it fears that investors are ahead of Street expectations for comps. and earnings.

Waiting For Pullback In Wingstop

On Wingstop, Stephens said its economics or growth profile is impressive. The firm views it as an attractive on-trend growth story, with 19 percent unit growth estimated for 2016. The firm said it would be more constructive on the shares of the company on a pullback, going by the bump expected from national advertising and its growing 75 percent to-go business.

Rating/Price Target

  • Domino's Pizza: Equal Weight/$180.
  • Papa John's: Overweight/$100.
  • Wingstop: Equal Weight/$32.

At Time Of Writing

  • Domino's Pizza was up 1.31 percent at $168.21.
  • Papa John's was adding 0.38 percent at $83.75.
  • Wingstop was slipping 1.18 percent at $28.46.

Latest Ratings for WING

DateFirmActionFromTo
Nov 2017JefferiesMaintainsHold
Nov 2017Stifel NicolausUpgradesHoldBuy
Oct 2017Longbow ResearchInitiates Coverage OnNeutral

View More Analyst Ratings for WING
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas News Price Target Reiteration Restaurants Analyst Ratings Movers Best of Benzinga

 

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