It's time for investors to take some profits from Domino's after a strong second quarter for the stock, according to Citi. The stock has surged ahead of the broader market recently, rising more than 24% over the past three months. Analyst Sergio Matsumoto downgraded the stock to neutral from buy, saying in a note to clients on Tuesday that the stock appears fully valued. "We believe DPZ's current price fully reflects the recovery in the carryout channel, representing 35% of US sales mix, as well as market share gains during 2020 vs. competitors Pizza Hut, other chains, and independent shops," the note said. Even with the downgrade, the firm did raise its price target for Domino's to $480 per share from $435. The new target is only about 1% above where the stock closed on Friday. Additionally, rising prices could also be an issue for Domino's. Citi said "an emerging concern is rising inflation for food and labor, which represent 27% and 29% of sales at US company-owned stores" but still expects the company to grow its margins, according to the note. —CNBC's Michael Bloom contributed to this report.
An employee moves pizza boxes before a delivery at a Domino's Pizza restaurant in Chantilly, Virginia.
Andrew Harrer | Bloomberg | Getty Images
It's time for investors to take some profits from Domino's after a strong second quarter for the stock, according to Citi.