Domino’s hit with downgrade on slower growth

RBC Capital Markets downgraded Domino's Pizza (DPZ) to Sector Perform from Outperform, trimming its price target to $500 from $550, citing expectations for weaker U.S. sales growth and slower international expansion in higher-revenue markets. The firm anticipates that recent sales boosts from third-party delivery partnerships will taper off by late 2026 as the company laps these initiatives, alongside decelerating U.S. comparable sales growth and a shift in international store growth to lower average-unit-volume markets. This outlook suggests limited scope for further valuation increases and a balanced risk/reward profile, given slowing market share gains and a modest 2026 EPS growth estimate of 5.5%.

Analysis

RBC Capital Markets has downgraded Domino's Pizza (DPZ) to Sector Perform from Outperform and trimmed its price target to $500 from $550, citing a more balanced risk/reward profile at current levels. The core of the downgrade thesis rests on the expectation of decelerating growth drivers. Specifically, RBC anticipates that the boost to U.S. same-store sales from recent partnerships with DoorDash and Uber Eats will begin to taper off in the second half of 2026 as the company laps those initiatives. Concurrently, the firm flags a potential drag on international sales momentum, as a significant portion of new store growth is occurring in lower average-unit-volume (AUV) markets like China and India. This is compounded by slowing market share gains in the face of heightened competition from smaller chains and local operators. RBC projects a modest 5.5% EPS growth for 2026, concluding that this outlook is not supportive of further multiple expansion for the stock.

Key Decisions for Investors

• Investors should moderate expectations for U.S. sales growth, as the primary catalyst from third-party delivery partnerships is expected to normalize beyond 2025.
• Monitor the composition of international store growth, as an increasing mix of lower-AUV markets could suppress consolidated revenue growth and margin profiles.
• Given the analyst's view of limited valuation upside and a projected 5.5% EPS growth in 2026, consider if the current stock price adequately reflects the risk of decelerating growth and increased competition.