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Why Most Analysts Rate Papa John’s Stock a ‘Hold’

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Price target

As of July 5, Papa John’s (PZZA) was trading at $51.06. Analysts were expecting the stock to reach $59.80, which represents a return potential of 17.1%.

Papa John’s lower-than-expected EPS and lower SSSG (same-store sales growth) in the first quarter appears to have prompted analysts to lower their price targets. On June 19, Citigroup lowered its price target from $71 to $62, while Stifel cut its price target from $57 to $50.

The price target and return potential of Papa John’s peers are as follows:

  • Domino’s Pizza (DPZ): price target of $278.06, which represents a fall of 0.1% from its current stock price
  • Yum! Brands (YUM): price target of $88.58, which represents a return potential of 13.9%
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Analysts’ ratings

Of the seven analysts that follow Papa John’s stock, 28.6% are favoring a “buy,” and 71.4% are favoring a “hold.” None of the analysts are recommending a “sell.” Currently, Papa John’s is trading below analysts’ 12-month target price. However, that doesn’t mean an automatic “buy.” Investors are advised to analyze analysts’ estimates discussed in the previous parts of this series before making any investment decisions.

Valuation multiple

The decline in Papa John’s stock has lowered its valuation multiple. As of July 5, Papa John’s was trading at 20.2x compared to 22.4x before the announcement of its first-quarter results. That same day, Domino’s Pizza (DPZ) and Yum! Brands (YUM) were trading at 31.0x and 21.4x, respectively. Declining SSSG and lower margins have led Papa John’s to trade at a lower valuation multiple than its peers.

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