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Why Domino's, Wendy's, and Papa John's Are Absolutely Soaring Thursday

By Daniel Miller - Mar 19, 2020 at 5:42PM

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Investors and analysts see a silver lining for some restaurant stocks.

What happened

Shares of Domino's (DPZ -0.40%), Wendy's (WEN 4.76%), and Papa John's International (PZZA 0.01%) are soaring 14%, 42%, and 40%, respectively, on Thursday afternoon. It's a relatively calmer day in the markets as some investors see a silver lining in some restaurant stocks.

So what

One intriguing bit of news came from Domino's, which said its franchise-owned locations are planning to hire roughly 1,000 people across about 100 stores in Chicago; it has noticed an increase in delivery demand amid people staying home and dine-in restaurants temporarily closing their doors to consumers. The pizza juggernaut estimated it could have as many as 10,000 job openings as the coronavirus pandemic continues to threaten the restaurant industry.

Papa John's CEO Rob Lynch also said the company would be going on a hiring spree, as the pizza-delivery business is "uniquely set up to persevere during these challenging times." Lynch also noted that President Donald Trump and Treasury Secretary Steven Mnuchin made clear on a conference call how important it was to support drive-thru, takeout, and delivery business during this time -- with an emphasis on making these interactions safe, sanitized, and with little to no contact.

Pizza being cut into slices.

Image source: Getty Images.

"While many local, state, and federal rules are closing dine-in restaurants, the opportunity to keep feeding our neighbors through delivery and carryout means that a small sense of normalcy is still available to everyone," said Domino's CEO Richard Allison in a statement. That notion was backed up this week by Stephens analyst James Rutherford, who noted, "Consumers are starting to shift their eating-out budgets toward delivery and carryout meals in an effort to avoid crowds."

Now what

While increased delivery demand could be a silver lining for some restaurant stocks, another likely boost to the stocks came from The National Restaurant Association (NRA) asking for a $145 billion recovery fund from the Treasury Department for the broader restaurant industry. The NRA explained that the COVID-19 coronavirus outbreak will likely sink sales by $225 billion over the next three months and could cost between 5 million and 7 million jobs if the restaurant industry shuts down for the same three-month period. All in all, investors were clearly happy to hear government support for the restaurant industry and a direct request for action by the NRA, as well as increased delivery demand and a commitment to hire amid the outbreak.

Make no mistake: Companies across the U.S. will feel the impact from the COVID-19 coronavirus as we inevitably slow the economy while attempting to slow the spread of COVID-19, but history provides many examples of markets bouncing back from similar developments. Investors should try to avoid any knee -jerk reactions, accept that markets will be volatile in the near term, and focus on investing in companies with strong balance sheets and long-term growth stories.

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Stocks Mentioned

Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$396.54 (-0.40%) $-1.59
Papa John's International, Inc. Stock Quote
Papa John's International, Inc.
PZZA
$83.62 (0.01%) $0.01
The Wendy's Company Stock Quote
The Wendy's Company
WEN
$19.13 (4.76%) $0.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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