Domino's Pizza (DPZ -3.2%) is one of the biggest decliners of the consumer discretionary stocks listed in the S&P 500 Index following a Credit Suisse downgrade on the pizza chain operator to Neutral from Outperform.
Analyst Lauren Silberman pointed to increased risk to DPZ numbers from labor challenges, changes to national value platforms and unit growth delays.
"DPZ is facing outsized labor challenges given heightened competitive activity for delivery drivers, & we have limited visibility into the timing of an improvement as dynamics appear to be somewhat structural in nature, & DPZ is unlikely to supplement with 3P driver networks as it seeks to maintain control of the customer experience & its delivery infrastructure is a competitive advantage. Staffing challenges are materially weighing on top-line."
Looking ahead, Silberman and team continue to have conviction in DPZ's high quality, digital-forward growth story, including the 6% to 8% unit growth and 6% to 10% retail sales growth projections. The ratings drop is based on shares seen trading at a level that offers a balanced risk-reward profile for investors.