5 explicit warnings on Domino’s
Livewire
Domino’s result saw it off by more than 22% on the open, or 51% down over 12 months, yet the warning signs were clear. Leading into the result, the short position was as high as 12.1%, and Livewire’s contributors have been consistently negative on the stock for months. 5 of the most explicit warnings are below, with a more positive view on the stock from Tim Samway at Hyperion Asset Management.
Source: Shortman.com
ANDREW TANG, Morgans
JAMES GERRISH, Market Matters
“It’s still hard to argue in favour of [Domino's] on fundamental metrics without a good pair of rose coloured glasses on – and the shorts certainly have been building here". (VIEW LINK)
RICHARD COPPLESON, Bell Potter
"Dominos now has its highest short position ever. The shorts can see blood in the high PE stocks and this one had initially withstood the storm better than other high PE stocks. But it has been savaged hard in the last few months. Problem is that there are & very few instos who dare pay these multiples (especially after the recent general PE contraction) and so the buyer pool is very limited. BUT now with the shorts taking a shine to it, they have extra pressure on them." (VIEW LINK)
SIMON CONN, Investors Mutual
“Companies with forecast strong EPS growth like Dominos Pizza, Corporate Travel and a2 Milk are trading on steep multiples and in our view are pricing in excessively good news. We do not own any of these companies. While they may have attractive growth prospects, they appear over valued to us and we are always very disciplined around valuation.” (VIEW LINK)
GEOFF WILSON, Wilson Asset Management
In an episode of Buy Hold Sell Live, Geoff Wilson said he would be steering clear of Domino’s Pizza (42x p/e), primarily on valuation grounds, as well as Bapcor (24x p/e), and Corporate Travel Management (32x p/e). (VIEW LINK)
TIM SAMWAY, Hyperion Asset Management
Tim Samway, Managing Director, is more sanguine. He says that the first reaction is rarely the right one, and was generally not that unhappy with the result: "There are a few misses and our numbers will come down in the short-term, but it feels like an overreaction". In this wire, he also points out the strong message coming from management on the $300 million share buyback: (VIEW LINK)
FULL COMMENTARY TIMELINE ON DOMINO’S
You can see all Livewire research and commentary on Domino’s here: (VIEW LINK)
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The Livewire Equities feed brings you a range of insights that relate to Australian equities
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