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Domino’s Pizza Inc. has introduced a chicken wing menu option that BTIG analysts think could lure diners away from Wingstop Inc.
The 10-piece wing item has new sauces and a price tag, $7.99, that analysts say will be enticing to value-conscious customers.
Domino’s DPZ, -4.32% previously had wings on the menu, but, according to Richard Allison, the company’s chief executive who spoke about the new item on the Thursday earnings call, they were in need of improvement.
“In our view, the upgraded product quality coupled with the investment behind advertising to support the rollout could allow the brand to take share in this multibillion-dollar category,” wrote BTIG analysts led by Peter Saleh.
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“Furthermore, we note that the aggressive price point of 79 cents per wing compared with Wingstop which is typically north of $1 per wing could result in some pricing pressure across the category.”
BTIG recently downgraded to neutral from buy at Wingstop WING, +3.05% on concerns that the company lacked the funds for expansion.
BTIG rates Domino’s stock buy with a $440 price target.
Domino’s is upping its game in the chicken wing category in time to meet heightened demand.
“While the announced menu innovation isn’t necessarily new, we would point to the strong performance of the chicken category both pre-COVID and since, and believe there may ultimately be greater opportunity for trial and check add-on from an improved wing product vs. other ‘new’ items,” said RBC Capital Markets in a note.
See:Skyrocketing COVID-19 cases around the U.S. slows dine-in restaurant recovery
RBC rates Domino’s stock outperform with a price target of $458, up from $435.
Domino’s reported earnings and revenue that blew past expectations, with U.S. same-store sales soaring 16.1%.
Domino’s stock closed Thursday down 1.5% and is down nearly 4% on Friday. Shares have rallied 33.3% for the year to date while the S&P 500 index SPX, +0.28% has slipped 0.1% for the period.
Analysts have been upbeat about Domino’s and its pizza delivery competitor Papa John’s International Inc. during the pandemic due to their digital ordering, delivery and contactless capabilities.
“From here, value will be a major focus, while menu innovation could help maintain outperformance,” wrote UBS in a note.
UBS rates Domino’s stock neutral with a price target of $415, up from $385.
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Stifel analysts think Domino’s can maintain its same-store sales momentum. Domino’s said it would be launching additional items in the coming months.
“We believe many investors will find the wing offering a bit underwhelming, but additional launches in the coming one to two months would represent the most product launches Domino’s has ever had in a single year,” wrote analysts led by Chris O’Cull.
“We are confident management will leverage the various launches to create new menu messaging and awareness, calling attention to Domino’s evergreen value platform.”
Stifel rates Domino’s stock hold and raised its price target to $400 from $360.
