Berenberg downgrades Domino's Pizza to 'sell'

The German bank expected pressure from competitors more focused on growth and less on returns to continue to mount in the wake of the Covid-19 related lockdowns as more restaurants would consider providing delivery services as a way to supplement their income while in-store capacity is constrained by social distancing measures.

Berenberg also highlighted that Domino's has argued that trade since lockdown had been affected by the removal of collection, which typically makes up around 20% of store revenues but when collection reopens, the analysts pointed out that restaurants will too.

"Come that point, we expect many customers will swap back their Domino’s 'date nights' for restaurant meals," said Berenberg.

"With earnings growth likely to be negative in 2020 and lacklustre (at best) thereafter, we struggle to justify the size of the stock’s current valuation gap versus most leisure peers," added the bank, which transferred coverage to Owen Shirley.