Broker snap: Domino's still a 'sell' despite Q1 beat, says Panmure

4th Apr 2013 09:13

Panmure Gordon has raised its target price for Domino's Pizza from 360p to 380p after the group's first-quarter update came in well ahead of expectations, but the broker has retained its negative stance on the stock.Like-for-like (LFL) sales in the pizza chain's first quarter ending March 31st were up 6.6% year-on-year, well ahead of Panmure's 3.0% estimate and a marked acceleration from the 1.6% growth rate seen in the first seven weeks of the year.However, as the broker notes, Domino's faces a "very challenging" LFL sales growth comparative in the second quarter of 8.1%. This was due to "last year being the wettest Q2 on record, the Diamond Jubilee celebrations and Euro 2012," Panmure said.WIth Domino's saying that full-year trading will be in line with market estimates, the broker said it expects no change to consensus forecasts for £51.2m of profit before tax and 23.9p of earnings per share (EPS)The stock trades at 24.1 times 2013 estimated earnings, which Panmure reckons is "relatively expensive" for the 8.1% EPS growth it estimates this year.The new 380p target price is based on a price-to-earnings ratio of just 16.Shares were up 7.18% at 612p in morning trade on Thursday.BC