Domino’s Pizza – Algo Signal

Domino’s Pizza Enterprises is now under Algo Engine buy conditions and is a current holding in our ASX model portfolio.

We see price support between $65 & $71.

Domino’s Pizza Enterprises has now rallied 10% from our entry-level. While DMP’s PE multiple remains elevated at 34x forward earnings, EPS growth is forecast to be 8 -10% and the FY21 yield is 1.9%.

We suggest traders use the short-term momentum indicators as a strategy to manage the timing of taking the short-term. We don’t consider Domino’s Pizza Enterprises a core portfolio holding and feel it makes greater sense to trade rather than hold.

Domino’s – “High Conviction” Sell

Domino’s Pizza Enterprises is under Algo Engine sell conditions and is a current “high conviction” short.

A combination of underperforming international stores and an eroding position within technological leadership across fast food means we struggle with the 30x PE multiple and low 2.5% yield.

Within 2 – 5 years we forecast the business trades at 14x earnings and 4% yield, meaning the fair value is closer to $20, not the current price of $52.

 

 

 

 

Will Domino’s Deliver In 2018?

Shares of Domino’s Pizza are up over 2% at $45.60 as a research report from Morgan Stanley forecasts the stock rising to $53.00 over the next 12 months.

The report suggests the recent fair-wage claims and complains from franchisees have been overstated in the sell off in the share price.

The report also points out that DMP is the third most shorted stock on the ASX, with 16.5% of the company in the hands of short sellers.

From a technical perspective we see a key price hurdle in the $50.00 area, which is the bottom of the price gap lower on August 11th.

Short-term traders looking to buy DMP should place a stop around the $44.80 level.

Domino’s Pizza

 

Domino’s Pizza Isn’t Delivering

Our ALGO engine originally triggered a sell signal for Domino’s Pizza on July 25th at $58.00. Another sell signals was triggered on the close yesterday at $45.80.

As the chart below illustrates, the dominant chart pattern in the stock is the 13% gap lower between August 14th and 15th.

This gap lower coincided with Domino’s rollout of their new “Quality Fresh” promotion. Early numbers from the company haven’t shown that the “premium” pizza promotion has been a success.

Yesterday’s sell signal is just inside the gap area and fits into the “lower high” chart formation.

A reasonable downside target on DMP over the medium term is $38.00.

Domino’s Pizza

 

 

Algo Update – Short Signal in Domino’s

The chart below shows the recent Algo Engine short signals in DMP. We look for the price action to test lower levels in the near-term as the lower high structure remains the predominate technical pattern.

Stay on watch as the last and final leg lower in the selling occurs. Investors can expect a sharp rally higher from oversold conditions, once we see DMP trade below $38.

Chart – DMP