By Tonya Garcia, MarketWatch
With more people expected to stay home to track the U.S. 2020 presidential election and the summer Olympic Games in Tokyo, pizza delivery chains like Domino’s Pizza Inc. and Papa John’s International Inc. are top restaurant picks for analysts from BTIG.
“As we saw the last time around in 2016, we believe these events could present a significant distraction from restaurant visits, which has negative implications for most of casual dining given their dependence on in-restaurant sales,” wrote analysts led by Peter Saleh.
The summer Olympics in Tokyo will take place in late July.
“We expect the 13-to-16 hour time difference to drive an increase in late-night pizza delivery from national chains to accommodate viewing,” BTIG said.
Papa John’s /zigman2/quotes/207343722/composite PZZA -0.90% is also in the midst of a turnaround that includes new leadership in Chief Executive Rob Lynch, and a new spokesperson, former NBA star Shaquille O’Neal.
In addition to expected menu innovations and marketing, BTIG thinks there’s room for growth through improved efficiencies, better margins, and more beneficial insurance costs for Papa John’s corporate stores.
Papa John’s stock is rated buy with a $75 price target, up from $67.
BTIG has rated Domino’s /zigman2/quotes/201587798/composite DPZ -2.41% a “Top Pick” for years due to its skyrocketing stock movement and domestic system sales, which have increased 46% since 2015.
Total annual sales have risen from $2.79 billion in 2017 to $3.43 billion in 2018. Sales are forecast for $3.59 billion in 2019, according to FactSet.
Domino’s stock has gained 22.4% over the last year.
BTIG expects low-single-digit same-store sales growth for Domino’s domestically, with a boost from new menu items and new technology, the GPS tracking on deliveries.
“We believe such a product introduction could reignite order growth and be a catalyst for stronger comparable sales as the year progresses,” analysts said.
Domino’s is rated buy with a $325 price target.
BTIG also chose Chipotle Mexican Grill Inc. /zigman2/quotes/200781108/composite CMG -3.82% as a “top pick” for a second year.