Papa John's Earnings: We See Value in Shares but Chain Needs Consumers to See Value in Its Pizza

We plan to trim our $69 fair value estimate for narrow-moat Papa John's by a high-single-digit percentage after digesting the firm's weak second-quarter results, but still see substantial value in the name for long-term investors. With its CEO search in the rear view, we expect the brand to prioritize its value positioning, leaning into national platforms like its $6.99 pairing menu and strategic, attractively priced limited-time offers like NY Style Pizza to drive traffic. Our base-case forecast assumes that the firm is able to do so without excessively discounting its core menu or tainting its premium brand cachet within the category. The name remains one of our top picks in the restaurant industry, with competitive unit economics underpinning our estimates for average annual systemwide sales and unit growth of 3.5% and 4%, respectively, over the next five years. While the firm suffers from customer trade down more than value-oriented peers like wide-moat Domino's and privately held Little Caesar's, we don't believe that its brand or long-term positioning are permanently impaired.