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Here's Why You Should Retain Papa John's (PZZA) Stock Now
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Papa John’s International, Inc. (PZZA - Free Report) is likely to benefit from menu innovation, digital initiatives and unit-expansion efforts. Also, emphasis on digital investments to increase customer frequency bode well. However, dismal comps and inflationary pressures are a concern.
Let’s discuss why investors should retain the stock for the time being.
Factors Driving Growth
Papa John’s continues to focus on product introduction to drive growth. During fiscal 2022, the company emphasized on barbell strategy, boosting its menu’s offer value and variety while limiting complexity to restaurant operations and supply chain. The company stated benefits from menu platforms, comprising Epic Pepperoni-Stuffed Crust, Pepperoni-Crusted Papadias, Crispy Parm Pizza New York Style Pizza and Papa Bowls. In December 2022, the company launched Papa Bites featuring chicken parmesan and Oreo cookie and reported solid feedback with respect to the same. Also, the company announced the addition of the new hot lemon pepper chicken wings to its Papa Pairings platform. PZZA is optimistic with respect to its new proprietary menu offerings, including Doritos, Cool Ranch and Papadia. We believe that menu innovation efforts will likely drive long-term ticket and transaction growth in the upcoming periods.
Papa John’s invests in technology-driven initiatives like digital ordering to boost sales. The company’s online and digital marketing activities have increased significantly in the past several years, owing to the higher utilization of online and mobile web technology. This and the emphasis on partnerships and integrations of third-party delivery aggregators bode well. The company is bullish on third-party delivery partnerships as the initiative paves the path for additional opportunities to meet delivery capacity at peak times and reach new customer segments.
The company’s loyalty program continued to witness a rise in digital transactions during first-quarter 2023. Features like early access to new products and better targeting of offers and promotions as well as higher frequency and ticket have been benefiting the company. During the quarter, digital channels contributed nearly 85% to the company’s sales. As of Mar 26, 2022, the company has more than 30 million Papa Rewards loyalty members, up from 28 million reported in the previous quarter. The company emphasized on increasing investments in this channel to increase customer frequency and personalization and attract new members.
Increased focus on identifying new markets (to enter) and attracting new capitalized franchisees (for partnership) bodes well. In first-quarter 2023, the company announced a development agreement to enter India in partnership with PJP Investments Group. This partnership plans to open 650 new restaurants in India over the next 10 years. The company is on track to meet its 2023 global development outlook of opening 270 and 310 net new restaurants. It expects its worldwide net unit (from fiscal 2023 through 2025) to increase between 1,400 and 1,800 net new units.
Concerns
Image Source: Zacks Investment Research
Shares of Papa John's have declined 18.7% in the past year against the industry’s growth of 21.3%. The downside was mainly due to challenging macro environments, including softening economic conditions (in the U.K.), staffing challenges and inflationary pressures.
During the first quarter, the company’s international comps were negatively impacted by challenges in the U.K. market. During the quarter, comps at international restaurants were down 5.8% year over year against growth of 0.8% reported in the prior-year quarter. Adverse macroeconomic conditions resulted in negative comparable sales and a challenging operating environment for its franchisees. Given the macroeconomic challenges and uncertainty in international markets, the company anticipates international comp sales to remain under pressure throughout 2023.
Zacks Rank & Key Picks
Papa John's currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Chipotle’s 2024 sales and EPS suggests growth of 12.5% and 19.7%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has gained 19.7% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s levels.
Chuy’s Holdings carries a Zacks Rank #2. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of CHUY have increased 94.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Papa John's (PZZA) Stock Now
Papa John’s International, Inc. (PZZA - Free Report) is likely to benefit from menu innovation, digital initiatives and unit-expansion efforts. Also, emphasis on digital investments to increase customer frequency bode well. However, dismal comps and inflationary pressures are a concern.
Let’s discuss why investors should retain the stock for the time being.
Factors Driving Growth
Papa John’s continues to focus on product introduction to drive growth. During fiscal 2022, the company emphasized on barbell strategy, boosting its menu’s offer value and variety while limiting complexity to restaurant operations and supply chain. The company stated benefits from menu platforms, comprising Epic Pepperoni-Stuffed Crust, Pepperoni-Crusted Papadias, Crispy Parm Pizza New York Style Pizza and Papa Bowls. In December 2022, the company launched Papa Bites featuring chicken parmesan and Oreo cookie and reported solid feedback with respect to the same. Also, the company announced the addition of the new hot lemon pepper chicken wings to its Papa Pairings platform. PZZA is optimistic with respect to its new proprietary menu offerings, including Doritos, Cool Ranch and Papadia. We believe that menu innovation efforts will likely drive long-term ticket and transaction growth in the upcoming periods.
Papa John’s invests in technology-driven initiatives like digital ordering to boost sales. The company’s online and digital marketing activities have increased significantly in the past several years, owing to the higher utilization of online and mobile web technology. This and the emphasis on partnerships and integrations of third-party delivery aggregators bode well. The company is bullish on third-party delivery partnerships as the initiative paves the path for additional opportunities to meet delivery capacity at peak times and reach new customer segments.
The company’s loyalty program continued to witness a rise in digital transactions during first-quarter 2023. Features like early access to new products and better targeting of offers and promotions as well as higher frequency and ticket have been benefiting the company. During the quarter, digital channels contributed nearly 85% to the company’s sales. As of Mar 26, 2022, the company has more than 30 million Papa Rewards loyalty members, up from 28 million reported in the previous quarter. The company emphasized on increasing investments in this channel to increase customer frequency and personalization and attract new members.
Increased focus on identifying new markets (to enter) and attracting new capitalized franchisees (for partnership) bodes well. In first-quarter 2023, the company announced a development agreement to enter India in partnership with PJP Investments Group. This partnership plans to open 650 new restaurants in India over the next 10 years. The company is on track to meet its 2023 global development outlook of opening 270 and 310 net new restaurants. It expects its worldwide net unit (from fiscal 2023 through 2025) to increase between 1,400 and 1,800 net new units.
Concerns
Image Source: Zacks Investment Research
Shares of Papa John's have declined 18.7% in the past year against the industry’s growth of 21.3%. The downside was mainly due to challenging macro environments, including softening economic conditions (in the U.K.), staffing challenges and inflationary pressures.
During the first quarter, the company’s international comps were negatively impacted by challenges in the U.K. market. During the quarter, comps at international restaurants were down 5.8% year over year against growth of 0.8% reported in the prior-year quarter. Adverse macroeconomic conditions resulted in negative comparable sales and a challenging operating environment for its franchisees. Given the macroeconomic challenges and uncertainty in international markets, the company anticipates international comp sales to remain under pressure throughout 2023.
Zacks Rank & Key Picks
Papa John's currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Chipotle Mexican Grill, Inc. (CMG - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) .
Chipotle sports a Zacks Rank #1 (Strong Buy). CMG has a long-term earnings growth rate of 31.8%. The stock has improved 49.9% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.
The Zacks Consensus Estimate for Chipotle’s 2024 sales and EPS suggests growth of 12.5% and 19.7%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has gained 19.7% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s levels.
Chuy’s Holdings carries a Zacks Rank #2. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of CHUY have increased 94.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s levels.