Papa John's International Inc (NASDAQ:PZZA) was downgraded to 'Underperform' from 'Neutral' by Bank of America, with analysts citing the company's chief financial officer's departure, persistent competitive pressures and a less optimistic outlook for same-store sales growth (SSSG).
The brokerage lowered its price objective to $34 from $42, in line with current levels, and reduced its earnings forecasts, writing that former CFO Ravi Thanawala's departure "suggests rapid SSSG turn unlikely."
"While former CFO Ravi Thanawala's departure for AEO will allow him to return to his previous industry, we think it's unlikely he would have left his post after less than three years if he believed a sharp turnaround were imminent," the analysts wrote.
"In addition, the disruption that comes with management turnover - particularly at a time when Papa John's is trying to execute a turnaround - may translate into less earnings predictability."
Bank of America also pointed to heightened competition in the pizza segment, arguing that larger operators continue to benefit from greater scale.
The analysts noted that Papa John's reported negative first-quarter 2026 same-store sales growth despite easier year-over-year comparisons, while Domino's Pizza outperformed. They said Domino's larger domestic system sales base provides lower costs and stronger unit economics, supporting investments in customer experience and value.
The firm estimates Domino's average co-op restaurant EBITDA at about $200,000 compared with approximately $140,000 for Papa John's, adding that the difference in franchisee cash flow is likely proportionate.
Bank of America lowered its second quarter North American same-store sales growth forecast to negative 6.7% from negative 6.4%, while reducing its international same-store sales growth estimate to 2.5% from 3.5%. Its adjusted EBITDA forecast was cut to $199 million from $204 million, compared with the company's full-year guidance range of $200 million to $210 million.
The analysts believe that competitive intensity increased further during the second quarter and that high-frequency data indicated Papa John's sales growth remained largely unchanged despite the launch of a Toy Story 5 promotional tie-in in late May.
Explaining the valuation change, Bank of America wrote that it lowered its price objective by applying a lower earnings multiple, while noting valuation multiples across the limited-service restaurant sector have compressed.
The analysts added that the recent sale of Yum Brands' Pizza Hut business also suggests limited upside for Papa John's valuation, concluding they see more near-term upside opportunities elsewhere.