Deutsche Bank downgrades Domino's Pizza, shares drop

(Sharecast News) - Domino's Pizza slumped on Tuesday as Deutsche Bank downgraded the stock to hold' from 'buy' and cut the price target to 235p from 309p, pointing to near-term cautiousness. "The investment case for Domino's Pizza has materially changed over the last two years," the bank said.

"From a formula which focused on returning the majority of free cash flow to shareholders through buybacks, management has been keen to reinvest this cash, including a potential brand acquisition, in order to accelerate earnings growth.

"However, this comes at a cost. Uncertainty over timing and execution has weighed on the stock, and as a consequence, a resumption of a share buyback has naturally become an increasingly attractive alternative."

Deutsche Bank said recent moves to announce a small buyback and launch a chicken sub-brand appear to be somewhat of a compromise.

At 0900 BST, the shares were down 3.4% at 196.90p.