Domino's (DPZ): 3Q26 - Are expectations low enough now?

Domino's 3Q results leave the core investor debate unresolved: traffic is growing, but it is not translating into meaningful sales or franchisee profit growth. Expectations were lowered, but likely not enough. In the US (0.3% SSSG), order counts continued to grow across delivery and carryout, but consumers are buying fewer items per order, and average ticket continued to decline despite 1.2% pricing. Limited options exist to stimulate demand outside incremental promo, which may further compress franchisee economics, already causing a reduction in NUG in 2026. We view 1-2% comp for 2027 as more realistic. Declining franchisee profitability prompted Domino's to lower its 2026 US net-opening outlook to 125-150 stores. In international markets (0.2% comp), a new CEO for Australia may delay the return to LSD% comp. With order growth still failing to translate into stronger sales and franchisee profits, we lower our price target to $340 from $390, based on 17x (vs. 20x previously) our NTM EP