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Further Reading from MarketBeat
Domino's Pizza: Outlook for the Berkshire Holding After Q1 DropAuthor: Leo Miller. Article Posted: 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.
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Warren Buffett'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. Although the stock was essentially flat from that initial purchase through the end of 2025, Berkshire has since more than doubled the stake to over 3.4 million shares.
That behavior is emblematic of Berkshire’s long-term investment style: continuing to buy a stock it perceives as undervalued even when the market disagrees. Domino’s got off to a rough start in 2026, with shares down nearly 20%. Much of the decline followed the company’s latest earnings report, which sent the stock down nearly 9% in one 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 rose 3.5% year over year. The company’s adjusted earnings per share were a larger disappointment, falling about 5% year over year to $4.13. Analysts had expected $4.29, which would have implied a decline of roughly 1%. U.S. same-store sales increased by just 0.9%, indicating that new store openings drove most of Domino’s growth. While new stores are a genuine growth lever, they don’t provide an apples-to-apples comparison for underlying demand. A company can boost sales simply by adding locations, but that doesn’t necessarily mean existing stores are performing better. Adding to the disappointment, Domino’s lowered its full-year guidance. The company now expects same-store sales to grow in the “low single digits” in both U.S. and international markets. Previously, it had guided to about 3% in the U.S. and 1%–2% internationally. Although “low single digits” overlaps with those figures, the broader phrasing allows for a weaker outcome and is therefore viewed as a downgrade. Weak Consumer, Elevated Competition Hit Domino’sDomino’s attributed the weak quarter to several headwinds. The company noted that consumer sentiment had fallen to levels not seen since the COVID-19 pandemic. Even though Domino’s emphasizes affordability, weak consumer confidence hurts restaurant traffic and lines up with the muted same-store sales, suggesting fewer repeat visits. Still, same-store sales have averaged about 2.3% since early 2023, which supports the possibility of a rebound. Competition also intensified as rivals promoted deeper discounts in areas where Domino’s has traditionally led. Yet those competitors face their own challenges: Pizza Hut (a Yum! Brands (NYSE: YUM) subsidiary) plans to close about 250 stores in 2026, and Papa John's International (NASDAQ: PZZA) is looking to close roughly 300 stores in North America in 2026 and 2027 combined. By contrast, Domino’s plans to open more than 175 U.S. stores in 2026. Lower price competition tends to favor scale: companies must offset lower sales per order with higher throughput to maintain revenue and margins. Among these chains, Domino’s is the one expanding scale, which raises questions about Pizza Hut’s and Papa John’s ability to sustainably match Domino’s pricing while reducing their store counts. Domino’s: Long-Term Value Doesn’t Guarantee OutperformanceDomino’s has grown free cash flow at a compound annual growth rate near 16% since Q1 2023. Its current valuation, however, implies long-term free cash flow growth of less than half that pace. Free cash flow has outpaced sales growth because the company has delivered meaningful margin expansion; its free cash flow margin is up roughly 400 basis points since Q1 2023. As a leader in a mature pizza market, it’s unrealistic to expect materially higher top-line growth than in recent years. That makes continued margin improvement critical to the stock’s outlook. Domino’s low prices and ability to open new stores support the potential for further margin gains. The MarketBeat consensus price target for Domino’s sits near $421, implying more than 20% upside. However, analysts’ targets moved down after the latest report, with the average of immediately updated targets near $407. There is likely some value in Domino’s shares today, but given the company’s position in a mature industry, it seems unlikely that the stock will outperform the S&P 500 Index over the long term at current prices. It will be worth watching what Berkshire Hathaway does with its Domino’s position over the coming quarters. |
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