In This Article:
We came across a bullish thesis on Papa John’s International, Inc. (PZZA) on Substack by Dominick D'Angelo. In this article, we will summarize the bulls’ thesis on PZZA. Papa John’s International, Inc. (PZZA)'s share was trading at $44.79 as of March 5th. PZZA’s trailing and forward P/E were 17.63 and 26.53 respectively according to Yahoo Finance.
Chefs at a pizza company preparing freshly made dough.
Papa John’s (PZZA) recently became the subject of buyout speculation when reports emerged on February 13 that Irth Capital Management was in discussions to acquire the company for $1.4 billion, or $43 per share. This news caused shares to surge 18%, significantly altering the risk-reward profile from its previous level of $35. However, the situation took a turn on February 20 when board director Anthony Sanfilippo unexpectedly stepped down, with the company notably omitting the standard disclosure that his departure was unrelated to disagreements with management. This raised questions about the credibility of the buyout talks, as it would be unusual for a director to resign ahead of a potential transaction, forfeiting board fees, stock compensation, and a premium payout. The lack of clarity suggests two possible scenarios: either Sanfilippo supported a sale while the rest of the board did not, or no formal offer was ever made, leading to a low probability of a deal materializing. If either case proves true, the stock’s rise from $35 to $50, and its retreat to the mid-$45 range, suggests further downside as arbitrage investors unwind their positions once it becomes clear that a transaction is unlikely.
A potential deal break could present a buying opportunity if shares decline to the mid-to-high $30s. Several factors support this thesis. First, in August 2024, Todd Penegor was appointed CEO, bringing a track record of success from his tenure at Wendy’s, where shares more than doubled under his leadership. His decision to come out of retirement for this role signals confidence in the company’s turnaround potential. Second, same-store sales (SSS) trends are expected to improve in the second half of 2025, setting the stage for a more positive narrative. While EPS is projected to decline 21% in 2025, it is forecasted to rebound 34% in 2026, creating a fundamental catalyst for renewed investor interest. The stock’s valuation remains undemanding, with PZZA trading at 13.6x estimated 2027 EPS at current levels and only 11.5x at a potential $38 deal-break price, making for an attractive risk-reward setup.