Papa John's Banks on Expansion & Technology, Risks Remain

A generic image of a newspaper with Stock Market as the Headline.
Credit: Shutterstock photo

On Jun 12, we issued an updated research report on Papa John's International, Inc.PZZA , which operates and franchises pizza delivery as well as carryout restaurants in the U.S and internationally.

Key Growth Drivers

Papa John's is the third largest take-out and pizza delivery restaurant chain in the world. The company's commitment to provide quality food and deliver better ingredients to its customers is commendable and should appeal to the health conscious customers.

We note that international expansion has been the backbone of Papa John's operations for quite some time now. In fact, the first quarter of 2017 marked the 29th consecutive quarter of positive comps in the international segment. Currently, the company has more than 1650 international restaurants in 45 countries.

It is also planning to expand in Brazil, Honduras, Uruguay and the Bahamas. Additionally, the brand has started to move into the Northern Africa region, anticipating opportunities there, and eventually wants to enter South Africa as well.

Since nearly 85% of the company's restaurants are franchised, we believe re-franchising efforts will help the company reduce its capital requirements and facilitate earnings per share growth and ROE expansion, over the long term.

Meanwhile, the company's online and digital marketing activities have increased significantly over the past several years in response to increasing use of online and mobile web technology. In fact, in the first quarter of 2017, Papa John's recorded 60% online sales mix and has a long-term target of reaching 80%, eventually.

Going forward, the company aims to continue making investments in technology which will be focused on foundational improvements to their digital channels to increase order conversion rate, frequency and ticket average.

Besides, Papa John's is also the official pizza sponsor of the Major League Baseball (MLB) and National Football League (NFL). Notably, these sports partnerships continue to drive growth on the local and national levels as it increases the company's visibility as a brand and attracts customers through digital and social media. Currently, Papa John carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Bottom Line

However, owing to its large international presence, Papa John's is exposed to risks of fluctuations in currency exchange rates, which impacts the company's top line. Moreover, an increasing wage rate environment and a challenging industry backdrop remain concerns for most restaurant chains like Jack in the Box Inc. JACK and The Cheesecake Factory Incorporated CAKE .

But we note that pizza giants like Domino's Pizza, Inc. DPZ and Papa John's are riding on the certitude that demand for pizzas is unlikely to go down in the coming days. Evidently, shares of the company have rallied 22.9% in the last one year, outpacing the Zacks categorized Retail-Restaurants industry's gain of 12.2%.

Though Papa John's has been faring well so far, continued slowdown in the industry at large might hamper its prospects.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Domino's Pizza Inc (DPZ): Free Stock Analysis Report

The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis Report

Jack In The Box Inc. (JACK): Free Stock Analysis Report

Papa John's International, Inc. (PZZA): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More