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This Month's Exclusive Story
Domino's Pizza: Outlook for the Berkshire Holding After Q1 DropSubmitted by Leo Miller. 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.
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Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) isn’t afraid to take stakes in companies the market has soured on. One such name 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.
That reflects Berkshire’s long-term investment style: continuing to buy a stock it sees as undervalued, even when the market disagrees. Notably, Domino’s is off to a rough start in 2026, with shares down nearly 20%. Much of that decline stems from the company’s latest earnings report, which sent the stock tumbling 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 3.5% year over year. However, the company’s adjusted earnings per share miss was more significant. The figure fell nearly 5% year over year to $4.13. Analysts had expected $4.29, which would have implied a decline of just 1%. Notably, U.S. same-store sales increased just 0.9%. That suggests new store openings drove the bulk of Domino’s growth. While new stores are a legitimate growth driver, they don’t provide an apples-to-apples comparison and tell us less about the underlying health of the business. A company can boost sales simply by opening more locations, but that doesn’t necessarily mean existing stores are performing well. Adding insult to injury, Domino’s lowered its full-year guidance. The company now expects same-store sales growth in the “low single digits” in both U.S. and international markets. That compares with prior expectations of 3% in the U.S. and 1% to 2% internationally. While “low single digits” technically overlaps with that range, it is still viewed as a downgrade, since any growth above 0% would fall within the revised guidance. Weak Consumer, Elevated Competition Hit Domino'sDomino’s attributed its poor performance to several factors. As the company described it, consumer sentiment fell to lows not seen since the COVID pandemic. Even with Domino’s emphasis on affordability, weak consumer sentiment is a headwind for restaurant companies. That lines up with Domino’s sluggish same-store sales growth, suggesting customers made fewer repeat purchases. Still, since the beginning of 2023, the figure has averaged around 2.3%, indicating that a recovery remains reasonable to expect. In addition, competitors offered more attractive 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. By contrast, Domino’s 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 more revenue. Among this group, Domino’s is the only one expanding its scale. That raises questions about Pizza Hut’s and Papa John’s ability to sustainably match Domino’s prices while shrinking their 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 has come despite revenue declining in 2023 and rising by only about 5% in 2024 and 2025. Because Domino's has delivered significant margin improvement, free cash flow has increased much faster than sales. Notably, the company’s free cash flow margin is up by 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 the company should expect growth materially above its recent pace. That makes continued margin expansion critical to the stock’s outlook. Domino’s affordable pricing and ability to keep opening new stores support the case for further margin improvement. The MarketBeat consensus price target on Domino’s sits near $421, implying more than 20% upside from current levels. However, targets fell sharply 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 name in a mature industry will 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, now that Warren Buffett has retired. |
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