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Domino’s Pizza (DPZ) Call Buyer into Earnings Weakness Nails Major Reversal Move

by | Jun 20, 2021

Domino’s Pizza (DPZ) shares closed June options expiration above $462 and on 4/29 a large June call buyer struck as shares sold off hard initially on earnings. The trade marked the bottom perfectly and shares rallied over the next six-weeks, the 3000 calls bought for $3.75M were valued at $18.6M at expiration. Our live alert came seconds after the trade executed while the next morning we followed up with a more in-depth look:

Domino’s Pizza (DPZ) into morning lows after reporting results on 4/29 with a large buyer of 3000 June $400 calls $12 to $13.20 and shares rallied throughout the day to put in a strong candle. DPZ has very little notable open interest of value currently. DPZ has been a long-time winner and shares now working back to near 2020 highs, the first Fibonacci extension target is up at $480. DPZ beat estimates for EPS with Revenues in-line, US same store sales growth of 6.3% and International at 11.8% growth. The $15.7B quick-service company trades 27.3X Earnings, 3.8X Sales and 41.1X FCF with a 0.93% dividend yield. DPZ forecasts see revenues growing 4.2% in 2021 versus tough 2020 comps and then returning to 7%+ annual growth with EPS growth also seen accelerating the next few years. DPZ was a big winner during the pandemic due to its delivery/takeout model and benefitted from its strong digital investments. On the call DPZ discussed opportunities for share gains via fortressing and says it is under-penetrated in the carryout business. DPZ profitability was a highlight as it capitalizes on more efficient marketing and digital transformation efforts. Analysts have an average target of $415 and short interest at 7% of the float jumped 98% Q/Q. JPM raised its target to $420 on 4/12. Citi started at Buy on 3/30 with a $435 target seeing undemanding valuation for a leader and sees the higher margin carryout business recovering and also positive on reinvigorated marketing efforts. Wedbush has a $475 target seeing DPZ as best-positioned to benefit from accelerated share gains post-COVID. Hedge Fund ownership fell 4% in the latest quarter filings, no notable concentrated holders. “