The Institutions Send Out For Papa John’s International 

The Institutions Are Buying Papa John’s International Ahead Of Earnings

The institutions have been buying up Papa John’s International (NASDAQ: PZZA) for the last year and their activity has only been getting stronger. Not only has the net activity been ramping over the past 6 quarters but the bullish bias has as well. That trend continued into 2022 and has the YTD activity on track to be the strongest quarter in both regards yet. This is important to note with Q4 earnings set to be released later this week, a report we think will spark upward movement in share prices. As for the institutions, they’ve purchased a net 7.5% of the stock over the past 4 quarters and own almost 96% of the stock. That includes several large shareholders that have insider ownership at 16%, another figure we see helping to drive this stock to new highs. 

Papa John’s International To Accelerate In Q4

The analysts are expecting to see Papa John’s revenue growth accelerate in Q4 and we see upside risk in the numbers. The analyst consensus is 11.5% YOY growth up more than 300 basis points from the previous quarter. In our view, the company’s global expansion efforts and the Omicron effect should help it top the consensus as it has done for the past two years. The real question is what will earnings look like? The consensus is for EPS to contract on a sequential basis due to rising cost pressures but rise 150% YOY. If the company can affect margin stability or, better yet, margin improvement this stock could move sharply higher on the news. 

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The consensus rating of the 14 analysts covering the stock is a weak Buy with upward pressure to the rating. The last three analysts' notes included 1 price target downgrade (to above consensus), one rating upgrade to Buy, and one initiated coverage at Buy and also with a price target above the consensus. The consensus price target is $143.43 and implies 25% of upside for the stock, it has been edging higher over the past 30 days and is up 48% since last year. Analysts Jim Northcoast, responsible for the recent upgrades, sees the companies development pipeline driving valuation over the long term. Oppenheimer named it a top pick for 2022 soon after the announcement of plans to open 1,350 stores in China. 

"We believe Papa John’s continues to exceed expectations, driving sales growth which has continued through the current period. Driving this performance is solid marketing keeping consumers engaged with the brand."

A Big Dividend Increase Is In Papa John’s Future 

Papa John’s pays a relatively attractive 1.23% dividend yield and we think investors should be expecting a large increase at the end of the 1st quarter. The company has only a 1-year track record of increases but a rock-solid balance sheet, a low payout ratio, and an outlook for earnings growth. The last increase was worth 55% to shareholders, the next one might not be as big but we are expecting double-digits. 

The Technical Outlook: Papa John’s Is At A Bottom 

Price action in Papa John’s is at a bottom and a reversal may start if the earnings report is good enough. The bottom is at the $115 level and accompanied by divergences in the indicators that are consistent with support at the current levels. Assuming price action moves higher in the wake of the report, we see it moving up to the $120 to $125 level in the very near to near term and then up to retest the all-time highs after that. If not, this stock may be in for a move down to the $110 level. 

Companies in This Article:

Company	Current Price	Price Change	Dividend Yield	P/E Ratio	Consensus Rating	Consensus Price Target
Papa John's International (PZZA)	$41.41	-1.3%	4.44%	36.97	Hold	$50.50