What happened

Shares of Domino's Pizza (DPZ 0.87%) jumped on Wednesday after the restaurant chain inked a delivery deal with Uber Technologies (UBER -0.38%). As of 10 a.m. ET today, Domino's stock was up about 10% and hitting new highs for 2023. For its part, Uber stock was completely flat as of this writing.

Therefore, the market clearly believes the new partnership is a bigger deal for Domino's than for Uber. This optimism may be fueled by the belief that this could add $1 billion in new sales for Domino's -- that's a lot of pizza.

So what

Almost all restaurant chains allow for third-party delivery from marketplaces like DoorDash, Uber Eats, Grubhub, and more. And some chains have exclusive partnerships with certain providers. But a notable holdout has been Domino's. Until now, the pizza stock has kept everything related to delivery in-house.

That's all changing now. According to Domino's, Uber Eats (and Uber's other delivery marketplace, Postmates) will be its exclusive third-party delivery partner through at least 2024.

And the partnership has a unique twist. Typically, orders are handled by independent delivery drivers. But uniformed delivery drivers for Domino's will still be handling orders that come in through Uber Eats, just like they always have.

Domino's CEO Russell Weiner believes the Uber partnership will be incremental to sales, based on the company's research. And Weiner told The Wall Street Journal that it could add $1 billion in incremental sales. Considering that the chain had over $17.5 billion in global sales in 2022, adding $1 billion to that would indeed be a meaningful contribution.

Now what

Just a few weeks ago, Domino's stock traded at its cheapest price-to-earnings (P/E) valuation in over a decade. It suggests that the market had largely lost interest, which is somewhat understandable considering management is guiding for modest growth this year.

I believe the market has been overlooking the fact that Domino's growth only looks modest compared to its enormous gains over the last couple of years. It was reasonable to take a breather. But as the partnership with Uber reminds us, the company still has viable avenues for growth that could reward shareholders.