Domino's Stock Eyes Worst Day in Years After Earnings

DPZ stock is headed for its fifth straight loss

Deputy Editor
Feb 21, 2019 at 10:29 AM
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The shares of Domino's Pizza, Inc. (NYSE:DPZ) are down 9.5% at $252.13 in early trading, after the restaurant concern reported earnings and same-store sales growth that fell short of analysts' estimates. The company cited competition from both food delivery services and other pizza companies as reasons for the miss. Today, DPZ stock is headed for its fifth straight loss, and its worst session since July 2017. 

Domino's stock just recently attempted to come within striking distance of its Aug. 29 high of $305.34, but was thwarted by the $295 level. Now, the equity is down almost 15% from last week's peak, and is trading at levels not seen since mid-January. 

With eight analysts giving DPZ a "strong buy" rating and six saying "hold," the stock could be vulnerable to downgrades. Plus, the consensus 12-month target price now represents a premium of more than 16% to current levels. 

Likewise, the security sports a 10-day call/put volume ratio of 1.64 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 90th percentile of its annual range, meaning options traders have had a healthier-than-usual appetite for these bullish bets of late -- a potential catalyst for more headwinds, should these optimistic positions begin to unwind. 

However, some of the recent call buying -- particularly at out-of-the-money strikes -- may have been bought by shorts seeking a pre-earnings options hedge. Short sellers have been piling on lately, with short interest up 102.7% in the most recent reporting period. The 2.58 million shares sold short now represent a healthy 7.2% of DPZ's available float.

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