Who says that rioting is bad for business. According to KeyBanc analysts, the recent surge in civil unrest is just what Papa John's ordered, because the catalyst used to justify an upgrade of the pizza chain to overweight, is that consumers - worried about terrorism, political and civil unrest - will choose to stay home and order pizza rather than head out for a meal. They believe that this situation will last until the November election, justifying their new $80 price target on the pizza maker.
"After speaking with several large operators and industry contacts, we believe the recent decline in casual dining restaurant segment fundamentals—traffic down 3% to 5% the past several weeks—may be the result of consumers eating more at home amid the current political/social backdrop, which we believe could last through the November election,” KeyBanc analysts wrote in a note published Tuesday, cited by MarketWatch. Diners’ shift to a preference for convenience will benefit pizza delivery businesses like Papa John’s, according to KeyBanc.
“We believe investors’ near-term neutral sentiment towards Papa John’s reflects a ‘missed it’ mentality following a meaningful recovery in its share price since reporting first-quarter results on May 3,” the note said.
As MW adds, Papa John’s, along with Domino’s Pizza, were downgraded to neutral from buy at Nomura in late June on concerns that traffic accidents among delivery and distribution drivers could push up insurance costs. “We have noticed, what seems to us, a recent uptick in pizza sector-related auto/truck accidents as of late,” Nomura analysts wrote in a note published June 22.
What Nomura did not factor in is that with US society breaking down, and mass shootings and violence between minorities and police at record levels, this would end up being a major benefit to pizza delivery.
Papa John’s shares, which jumped over 3% on Wednesday, are up 23.0% over the past three months.
If this new "pizza indicator" is correct, violence in America is about to get much worse.