This pizza is red hot! Domino’s and Papa John’s on fire
The United States are more divided than united when it comes to politics.
But even in these contentious times, there is something fans of President Donald Trump and his most ardent detractors can agree on: Americans love pizza, and we all probably ate our fair share on Super Bowl Sunday.
Domino’s and Papa John’s are booming — even as many other big restaurant and food chains have struggled lately.
Sales at McDonald’s have started to cool off in the U.S. after a resurgence last year. Starbucks just reported disappointing domestic results. And Chipotle is still a mucho caliente mess as it struggles to win back customers after its E. coli woes.
Lower commodity prices have also raised fears that food deflation will hurt sales at restaurants too.
But shares of Domino’s just hit an all-time high on Tuesday. The stock is up 14% already this year and more than 60% over the past 12 months. And even though Papa John’s is down a bit so far in 2017, shares have soared nearly 80% in the past year.
Domino’s and Papa John’s have both been thriving, but for slightly different reasons. Domino’s has been focusing on winning more younger customers with high-tech ways of ordering a pie, such as with emojis on Twitter and a bot on Facebook Messenger.
Domino’s has also been experimenting with the use of drones to deliver pizzas. It did a test run (fly?) in New Zealand last year.
Papa John’s on the other hand has mainly chosen to focus on the ingredients — and lots of them. The company recently resurrected its super-decadent (and protein heavy) Ultimate Meats pizza.
The company continues to rely on humor in its advertising to woo more customers.
One recent commercial featured its long-time pitchman, retired quarterback Peyton Manning, in an awkward spot when the mascots of his two former teams — the Indianapolis Colts and Denver Broncos — both show up at a party he’s hosting.
Another new spot even makes fun of Domino’s affinity for technology, showing the many things that could go wrong with having unmanned flying vehicles dropping pies from the sky.
Jokes aside, it’s clear that there is room for both companies to remain as hot as their pizza ovens. The big loser in the pizza wars still seems to be Pizza Hut, owned by Yum Brands, which is also the parent company of KFC and Taco Bell.
Despite some recent signs that things are starting to stabilize at Pizza Hut, it’s still a turnaround story. Same-store sales for Pizza Hut were down 1% in the third quarter.
That’s why investors may continue to order up Domino’s and Papa John’s stock, even though the shares aren’t nearly as cheap as their food.
Shares of both stocks trade for about 30 times earnings estimates, a valuation that’s higher than top tech stocks like Apple, Facebook and Google.
But Wall Street is expecting Domino’s and Papa John’s to keep delivering solid earnings growth as well as hot pies. Analysts are forecasting annual earnings increases of nearly 20% a year for the next few years.
Plus, there always seems to be some big event that calls for pizza, right? The NCAA March Madness college basketball tournament is right around the corner. Just hold the anchovies please.