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Today's Featured News
Domino's Pizza: Outlook for the Berkshire Holding After Q1 DropAuthor: Leo Miller. Article Published: 4/29/2026. 
Key Points
- Berkshire Hathaway has stood by its position in Domino's Pizza for more than a year amid the stock's weak performance.
- Domino's shares took a significant tumble after the company's latest earnings report, as macro factors and competition hurt sales.
- Domino's is expanding while customers close down stores, but it is questionable whether the juice in this stock is worth the squeeze.
- Special Report: The genie isn’t going back in the lamp
Warren Buffet's Berkshire Hathaway (NYSE: BRK.B) isn’t afraid to take stakes in companies the market is sour on. One of those names is Domino’s Pizza (NASDAQ: DPZ). Berkshire initiated a position in Domino’s during Q3 2024, purchasing 1.3 million shares. Despite the stock being essentially flat from then through the end of 2025, Berkshire more than doubled its position to over 3.4 million shares.
This reflects Berkshire’s long-term investment style, with the company continuing to buy a stock it sees value in despite the market disagreeing. Notably, Domino’s is starting 2026 in a rough patch, with shares down nearly 20%. Much of that decline stems from the company’s latest earnings report, which sent the stock down nearly 9% in a single day. After a difficult quarter, here’s where Domino’s stands going forward. Domino’s Misses, Lowers Guidance for 2026In Q1 2026, Domino's reported revenue of $1.15 billion, slightly below expectations of $1.16 billion. Overall, sales increased by 3.5% year over year. However, the company’s adjusted earnings per share miss was more significant. The figure fell by almost 5% year over year to $4.13. Analysts had expected $4.29, which implied a decline of just 1%. Notably, U.S. same-store sales increased by just 0.9%. That indicates new store openings drove the vast majority of Domino’s growth. While new stores are a legitimate growth driver, they do not provide an apples-to-apples comparison and say less about the health of a business. A company can boost sales simply by opening stores, but that does not necessarily mean existing stores are performing well. Adding insult to injury, Domino’s lowered its full-year guidance. The company now sees same-store sales growing by “low single digits” in both the U.S. and international markets. That compares with earlier expectations of 3% in the U.S. and 1% to 2% internationally. While “low single digits” technically overlaps with that range, investors viewed it as a downgrade because the new wording leaves little room for stronger growth. Weak Consumer, Elevated Competition Hit Domino'sDomino’s attributed its weak performance to several factors. As the company noted, consumer sentiment fell to lows not seen since the COVID pandemic. Even with Domino’s emphasis on affordability, weak consumer sentiment can be a headwind for restaurant companies. That fits with Domino’s sluggish same-store sales growth and suggests customers made fewer repeat purchases. Still, since the beginning of 2023, the figure has averaged around 2.3%, which suggests a recovery remains possible. Competitors also offered better deals to consumers, targeting an area where Domino's has historically led. However, Domino’s top rivals are also under pressure as they try to compete on price. Pizza Hut (a Yum! Brands (NYSE: YUM) subsidiary) plans to close 250 stores in 2026. Meanwhile, Papa John's International (NASDAQ: PZZA) is looking to close 300 stores in North America during 2026 and 2027 combined. Domino’s, by contrast, plans to open more than 175 stores in the U.S. in 2026. Lower prices favor scale. Companies have to offset lower sales per order with higher order volume to generate greater revenue. Among this group, Domino’s is the only one expanding its scale. That raises questions about Pizza Hut and Papa John’s ability to sustainably match Domino’s prices while reducing store counts. Domino's: Long-Term Value Doesn’t Equal Long-Term OutperformanceDomino's has grown its free cash flow at a compound annual rate of nearly 16% since Q1 2023. Currently, its valuation implies long-term free cash flow growth of less than half that pace. Strong free cash flow growth came despite revenue declining in 2023 and growing by only around 5% in 2024 and 2025. Because Domino's has seen major margin improvements, free cash flow has risen much faster than sales. Notably, the company’s free cash flow margin is up around 400 basis points since Q1 2023. Domino's is a leader in the mature pizza market. As a result, it is difficult to argue that the company should expect growth materially higher than it has achieved in recent years. That makes continued margin expansion vital to the stock’s outlook. Domino’s affordable pricing and its ability to keep opening new stores support the case for future margin expansion. The MarketBeat consensus price target on Domino’s sits near $421, implying more than 20% upside from current levels. However, targets moved down considerably after the company’s latest report, with the average of immediately updated targets sitting near $407. Ultimately, there is likely some value in Domino's shares. However, it seems unlikely that a company in a mature industry would deliver better long-term performance than the S&P 500 Index at current levels. It will be interesting to see what Berkshire Hathaway does with its Domino’s position over the coming quarters, with Warren Buffet now retired. . |
