Domino's, Papa John's draw consumers with tech: Analyst

Papa John's leading pizza technology?
Papa John's leading pizza technology?

Soaring pizza chain stocks should have more upside as large companies continue to refine their digital ordering platforms, a restaurant analyst said Tuesday.

But that shift will likely weigh on small, independent pizza shops.

"There are a lot of opportunities here for Papa John's and Domino's. Smaller players are having difficulty providing digital support and platforms," said Christopher O'Cull, a restaurant companies analyst at KeyBanc Capital Markets, in an interview with CNBC's "Power Lunch."

Papa John's Pizza
Source: Papa John's

Shares of the three-largest U.S. pizza chains have soared this year. Papa John's, Pizza Hut owner Yum Brands and Domino's have climbed 33, 26 and 20 percent, respectively.

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Papa John's and Domino's in particular have attracted customers by streamlining their digital ordering and payment options, O'Cull said. As more consumers put a premium on convenience, a lack of free cash to develop that technology can be a "barrier" for smaller shops, he said.

O'Cull contends that both Papa John's and Domino's shares can continue climbing as they sap market share from smaller competitors. Papa John's will likely yield better returns, though, as it is relatively cheaper than Domino's, he said.

Papa John's closed Tuesday at $74.44, while Domino's ended at $113.62.

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Correction: Domino's shares were around $113 in late trading Tuesday. An earlier version misstated the price.