Here's Why Investors Should Retain Papa John's Stock for Now

Papa John’s International, Inc. PZZA is likely to benefit from menu innovation, digital initiatives and marketing efforts. Emphasis on the Papa Rewards loyalty program also bodes well. However, a challenging macro environment and soft comps are headwinds.

Let’s delve deeper.

Strategic Efforts Aid PZZA’s Prospects

Menu innovation remains a strong lever for growth for Papa John’s, with additions such as the New York-style pizza in various sizes, the fan-favorite Cheesy Chacaroni and the newly introduced star-shaped pizza gaining traction in international markets. The company also continued simplifying its menu by removing underperforming SKUs and launched oven calibration initiatives to improve product consistency — a foundational move expected to unlock new product formats by mid-year. Looking ahead to the latter half of 2025, it plans to introduce new offerings that align with this balanced pricing approach.

Papa John’s is ramping up investment in technology-led initiatives, particularly digital ordering, which now accounts for over 70% of total sales. The company sees this as a key lever to deepen customer engagement, grow market share and improve unit-level profitability. Recent tech upgrades have driven higher app conversion rates and boosted repeat purchases, aided by enhancements in customer relationship management and the broader digital experience. To accelerate this momentum, Papa John’s has partnered with Google Cloud in a long-term agreement aimed at leveraging AI to personalize and streamline the ordering and delivery process. This collaboration is expected to enhance delivery logistics, predict customer preferences and elevate the end-to-end digital journey, reinforcing the brand’s commitment to innovation and reclaiming a leadership position in restaurant technology.

Papa John’s is leaning into its challenger brand identity with an assertive marketing approach focused on boosting brand visibility, strengthening value perception and deepening customer engagement. The company’s Meet the Makers campaign showcases the dedication of its team members and the quality of its pizzas, contributing to notable gains in value perception alongside promotions like Papa Pairings. With plans to spend an additional $25 million on marketing in 2025, it aims to further amplify its national and regional presence and maintain momentum.

Papa John’s has revamped its loyalty rewards program, enabling its 37 million-plus members to access rewards more quickly — a move that has driven stronger activation rates, more frequent transactions and increased customer engagement. New members are also returning to make repeat purchases sooner than before. Encouraged by the positive initial response, the company plans to further invest in the program throughout 2025, aiming to enhance simplicity, emotional connection and personalization. These efforts are expected to boost visit frequency and reduce the time between repeat purchases by deepening customer relationships through tailored brand experiences.

PZZA’s Headwinds

In the past year, shares of Papa John's have lost 13.3% against the industry’s growth of 7.3%. The downside was caused by a challenging macroeconomic environment.

Dismal comps have been hurting investor confidence for some time. In the fiscal first quarter, total comparable sales declined 1.3% year over year compared with the 2% fall reported in the prior-year quarter. Domestic company-owned restaurant comps declined 4.6% year over year compared with a 3% fall reported in the year-ago quarter. At North America’s franchised restaurants, comps fell 2.3% year over year compared with a 1.5% fall reported in the year-ago quarter. Comps at North America’s restaurants declined 2.7% year over year compared with a 1.8% fall reported in the year-ago quarter. In the first five weeks of the second quarter of fiscal 2025, North America comparable sales were down by less than 1% compared to the same period in 2024.

PZZA’s Zacks Rank & Key Picks

Papa John's currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail-Wholesale sector are BJ's Restaurants, Inc. BJRI, Brinker International, Inc. EAT and CAVA Group, Inc. CAVA.

BJ's Restaurants presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
 
BJ's Restaurants has a trailing four-quarter earnings surprise of 30.9%, on average. The stock has inched up 18.3% in the year-to-date period. The Zacks Consensus Estimate for BJ's Restaurants’ 2025 sales and earnings per share (EPS) implies growth of 3.2% and 23.8%, respectively, from the year-ago levels.
 
Brinker presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 24.5%, on average. The stock has gained 8.8% in the year-to-date period.
 
The Zacks Consensus Estimate for Brinker’s 2025 sales and EPS indicates an increase of 20.9% and 113.7%, respectively, from the year-ago levels.

CAVA presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 26.9%, on average. The stock has declined 25.8% in the year-to-date period.
 
The Zacks Consensus Estimate for CAVA’s 2025 sales and EPS indicates growth of 24.3% and 38.1%, respectively, from the year-ago period’s levels.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research