Papa John’s U.S. Pizza Sales Jump 33.5%; Shares Pop 7% In Pre-Market


Papa John’s International Inc. (PZZA) said on Wednesday that May comparable sales increased a preliminary 33.5% in North America as the company experienced “extraordinary” demand.

Shares are up 7% to $79.45 in Wednesday’s pre-market trading. The value of the stock more than doubled since mid-March as demand for pizza delivery accelerated during stay-at-home orders tied to the coronavirus pandemic.

International comparable sales in the April 27 to May 24 period rose 7% year-on-year, according to preliminary figures.

“In May, for the second straight month, Papa John’s delivered the best sales period in the company’s history. Our teams continue to meet the needs of new and returning customers and their communities, while making health and safety our top priority,” said Rob Lynch, President & CEO at Papa John’s. “As states and communities slowly reopen, we continue to show strong performance.”

Lynch added that the chain’s service of ‘No Contact Delivery’ and new products like Papadias, its flatbread calzone, continue to drive results.

In North America, almost all of Papa John’s restaurants remain open and fully operational. Overall out of the 2,100 international franchised stores, about 320 are temporarily closed, mainly in the Middle East, Latin America and Europe. In addition, a number of the chain’s international markets are open mainly for delivery only, such as in the United Kingdom.

Five-star analyst Peter Saleh at BTIG this month maintained a Buy rating on the stock with a $85 price target, citing the company’s expanded digital reach and the eventual refranchising of company-owned units.

“While we recognize the sales acceleration is attributable to stay-at-home orders and likely unsustainable, we expect the concept to maintain a significant portion of the gains once the environment normalizes,” Saleh wrote in a note to investors. “We continue to believe this business has significant opportunities to drive margin expansion through cost savings, and now, sales leverage.”

Overall, the Street has a cautiously optimistic outlook on the stock. Analysts are evenly divided between 6 Buys and 6 Holds adding up to a Moderate Buy consensus. The $77.30 average price target is less aggressive than Saleh’s projection and implies 4.2% upside potential in the shares in the coming 12 months. (See PZZA stock analysis on TipRanks).

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