Friday, February 23, 2007

Domino Pizza Analysts Asleep

Domino’s Pizza Inc. (NYSE:DPZ) announced Q4 and year-end results. Revenues are off dramatically and the investment buzz has been negative as the company fights its way through a variety of problems. The major one being same store sales growth or lack thereof.

Analyst following has been almost minimal as investor trading volumes turned attention to other stocks. The current recap plan announced on Feb 7 has put a floor on the stock. The recap offer will be financed by borrowing.

Investors became disillusioned because of declines in revenues and same store sales while lenders who will be ultra cash flow oriented are prepared to advance well in excess of one billion dollars.

Once you get through the recap offer the lenders are telling you that the business fundamentals are more than OK. The same store sales problem can be fixed. Once debt is under control dividends may be re-instated.

Analysts have missed the boat on this one. In the conference call they will not be allowed to ask questions because of the recap offer. That will probably allow them to save face. Watch for them to start beating the drum when the stock has started to move.