- Stephens analyst Joshua Long reiterated an Overweight rating on the shares of Papa John’s International, Inc. (NASDAQ:PZZA), lowering the price target to $90 from $95.
- The analyst expects the company’s international trends to remain under pressure, especially driven by the continued economic pressure in the U.K.
- The analyst noted that the price target reduction particularly mirrors the company’s updated debt balance of $805 million vs. prior $597 million.
- In addition, the company faced commodity and wage inflation in 1Q. The analyst noted that food costs (+13%) and labor costs remained elevated during the quarter, which weighed on Restaurant-level margins.
- Papa John’s to leverage third-party delivery platforms (particularly at peak periods) to better balance consumer demand and operational execution in the face of ongoing labor and staffing pressures.
- For FY23E, the analyst lowered the adjusted EPS forecast from $2.95 to $2.75. Adjusted EBITDA estimate is reduced from $222.9 million to $222.1 million. Higher G&A and interest expense drive the reductions, the analyst noted.
- All that said, the analyst maintained a favorable outlook on the brand’s strategic positioning, generally a higher-income customer base, and long-term growth potential.
- Price Action: PZZA shares are trading higher by 1.34% at $77.56 on the last check Friday.
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