This pizza chain's revamped rewards program could be good news for its stock, BTIG says

Published Wed, Sep 13 20237:40 AM EDTUpdated Wed, Sep 13 202311:31 AM EDT

Domino's updated loyalty program offers another reason to be optimistic about the stock, BTIG said. Analyst Peter Saleh reiterated his buy rating and top pick call for the pizza chain. His $465 price target implies shares could rally 18.1% from where they closed Tuesday. "As expected, Domino's announced changes to its loyalty program this morning in conjunction with the start of the fall season and 4Q23," he said in a note to clients Tuesday. "We view this as one of several sales catalysts that should regenerate the company's prior momentum." Domino's updated loyalty program includes new tiers and rewards that Saleh said should appeal to more customers as it has faster redemption and more options. Under the new plan, customers earn 10 points for every order of at least $5, while they previously had to spend a minimum of $10. At the same time, he said the value per dollar spent seems to be lower than the past version. That could modestly help store margins, though he said it depends largely on how customers choose to redeem their points. There are three reward tiers with nine different options in the new system versus just one reward previously. The update should build on other improvements in the business such as menu innovations and an upcoming launch with Uber Eats, Saleh said. BTIG also has a buy rating on Uber. More broadly, he said Domino's is a secular market-share gainer in the pizza category, with help from its competitive advantages in digital order, marketing and value. These advantages have led to meaningful sales, market share and unit economic improvements in recent years, he said. Recent pricing work should help margin expansion and improve the company's ability to get drivers, Saleh said. Still, he noted the bullish thesis is also helped in part by moderating commodity inflation, menu pricing and natural improvements in the labor market. Performance could be affected by how competition fares or if international development takes longer than expected to return, he said. — CNBC's Michael Bloom contributed to this report.