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Analysts Bullish On Papa John's CEO Change

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Analysts Bullish On Papa John's CEO Change

Papa John's International, Inc. (NASDAQ: PZZA) announced Tuesday Rob Lynch will replace Steve Ritchie as CEO, effective immediately. Despite what appears to be a constant turnover of executives, at least two Street analysts are bullish on the change.

The Analysts

Stifel analyst Chris O'Cull upgraded Papa John's from Hold to Buy with a price target lifted from $42 to $60.

MKM Partners analyst Brett Levy maintains at Buy, $55 price target.

See Also: Papa John's Appoints New CEO, Reaffirms 2019 Guidance

Stifel: 'Tactical Opportunity'

Papa John's board of directors acted quickly to bring a new change at the most senior executive level and Lynch will be given a change to prove to investors he can turn the company around, O'Cull wrote in a note. Lynch brings necessary experience to the table as CMO at Arby's where he helped over see a median store average unit volume (AUV) expansion of 8% per year on top of notable margin improvements.

O'Cull said Lynch will likely take a look at Papa John's menu and may "break through the promotional clutter" through new products or assume more risks with marketing initiatives. The CEO needs to improve the system's profitability to create a "more stable operating base" and may also look at raising capital to buyout franchisees that want to leave the system.

MKM: Now Is A Good Time For Change

Lynch's appointment marks the second CEO change over the past 18 months and offers a "fresh start" to the pizza chain's recovery story, Levy said. The pizza chain needs a "fresh set of eyes" to oversee the multiple initiatives on the table across branding, marketing, product, operations and relations with franchisees.

"We believe Investors, franchisees and executives alike need to see top-line improvements, unit-level and enterprise level profit recoveries, and continued strategic and operational progress that cuts into the value and scale gaps against the segment leaders, to prove out the recovery," the analyst wrote.

Benzinga's Take: Papa John's could ultimately convince consumers to order its pizza again. However, the chain needs to deliver a pizza that's competitive with rivals in price and quality or any turnaround plan is doomed to fail regardless who is CEO. Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Latest Ratings for PZZA

DateFirmActionFromTo
Sep 2019Initiates Coverage OnPerform
Sep 2019UpgradesNeutralOutperform
Sep 2019Initiates Coverage OnBuy

View More Analyst Ratings for PZZA
View the Latest Analyst Ratings

Posted-In: Brett LevyAnalyst Color Upgrades Price Target Restaurants Top Stories Analyst Ratings General Best of Benzinga

 

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