Shares in Domino’s Pizza (DOM) are up by 42% since 5 July to 393p yet analysts appear unconvinced the UK’s largest pizza chain has turned a corner.

Four out of the eight analysts who cover the stock have a ‘hold’ or ‘sell’ rating and four have a ‘buy’ rating while the average analyst price target sits around a tenth below current levels.

Before its latest results, the consensus earnings estimate for both 2023 and 2024 had been revised down by around 22% and 11% respectively since December 2022 according to Refinitiv data.

On 1 August, Domino’s reported first-half like-for-like sales growth close to 10%, raised full year profit guidance by around 8% and announced a new £70 million share buyback to return some of the proceeds from the disposal of its German associate.

Negatives which once hampered the shares have melted away like freshly sprinkled cheese on a hot pizza. The long-running spat with franchisees was settled in December 2021 and the year-long drought without a permanent CEO came to an end last month after industry veteran Andrew Rennie was appointed.

Numis described Rennie as a ‘very high quality’ appointment and one that removes a ‘key overhang’ for the share price.

Jefferies, which has an ‘underperform’ rating and 240p price target for the shares implying 39% downside, said: ‘We have been cautious on lower top-line opportunities versus history. The arrival of a new CEO with a strong Domino’s track record could provide a top-line growth catalyst.’

Liberum last month raised its price target to 300p from 230p and moved to a ‘hold’ rating from ‘sell’ following the appointment of Rennie and called the move a ‘game changer’ while complementing interim CEO Elias Diaz Sese who ‘kick-started a bold new strategy, one which we were warming to.’

Following the half-year results Liberum raised its price target by 20% to 360p but kept its ‘hold’ rating on valuation grounds with the shares trading on 19 times forward earnings.

‘But we do note the positive steps taken under the group’s value, digital and convenience strategy,’ the broker conceded.

Domino’s reported ‘encouraging’ momentum with like-for-like system sales excluding split stores increasing by 7.9% and total orders up 2.3% in the three weeks since 25 June 2023.

Collection orders increased by 17.3% in the second quarter, suggesting customers are seeking cheaper ways to buy Domino’s products during the cost-of-living crisis. Collections are typically discounted, either by price or deals such as buy one, get one free.

Delivery orders continue to be in decline at -3.9% in the second quarter but the trend has shown improvement on the previous three quarters (-4.9% in Q1 2023, -5.1% in Q4 2022 and -12.7% in Q3 2022).

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