Pizza chain Papa John’s International, Inc. (NASDAQ:PZZA)’s shares are down by 49% over the past year and by 39% year-to-date. On the 6th, the shares closed a whopping 17.8% lower. The dip occurred after Papa John’s International, Inc. (NASDAQ:PZZA) reported its second quarter earnings before market open. Looking at the report, it’s unsurprising why the shares fell as the firm’s second quarter revenue dipped by 8.8%, its system-wide restaurant sales dropped by 4.8% and net income dipped by $1 million to $8.7 million. Cramer hadn’t been optimistic about Papa John’s International, Inc. (NASDAQ:PZZA) ahead of the earnings and the latest results didn’t change his mind:
“Think about how Domino’s could make a comeback here. Pizza Hut, bought by private equity, always a bad sign. Papa John’s, just terrible, and got rid of the dividend. Domino’s, hold, I mean I think that maybe Domino’s [inaudible] to stay here. Good CEO, good numbers coming, some new dishes.”
Naturally, the latest results leave a lot to talk about Papa John’s International, Inc. (NASDAQ:PZZA). To support the bearish point of view, the firm also announced a dividend suspension, cut its EBITDA guidance to a midpoint of $185 million from an earlier $200 million and announced that it would close between 200 and 250 North American stores in 2026. These metrics indicate a troubled business that doesn’t inspire confidence. However, the earnings wasn’t all bad as Papa John’s International, Inc. (NASDAQ:PZZA) also delivered on the bottom line. During Q2, its adjusted earnings per share jumped to 46 cents from the earlier 41 cents. Percentage wise, the firm’s gross, operating and net profit margins in Q2 marked 29 basis points, 18 basis points and four basis points jumps.
Comparing Papa John’s International, Inc. (NASDAQ:PZZA) to Domino’s Pizza Inc. (NASDAQ:DPZ) makes the picture clearer and explains Cramer’s preference. While the shares are down by 23% over the past year and 18% year-to-date, the second quarter earnings painted a slightly better picture. Domino’s Pizza Inc. (NASDAQ:DPZ)’s revenue of $1.19 billion was higher than analyst estimates and marked a 4.3% jump.
Yet, the firm’s earnings missed analyst estimates and its US same-store sales also marked 0.1% growth which also missed estimates. Looking at these figures, it’s clear that Domino’s Pizza Inc. (NASDAQ:DPZ) isn’t that far ahead of PZZA when it comes to performance. Yet, the firm’s order count continued to grow in Q2 despite the overall turmoil in the industry. Looking at this, Cramer recommending ‘hold’ does make sense. However, Loop Capital downgraded the shares to Hold from Buy as it expressed skepticism about same-store sales growth.
Shifting towards the hedge funds, the fact that 45 hedge funds in Insider Monkey’s database had held Domino’s Pizza Inc. (NASDAQ:DPZ)’s shares compared to 35 for PZZA shows that the funds might agree with Cramer. However, the number did drop from 50 in Q4 2025. Domino’s Pizza Inc. (NASDAQ:DPZ)’s forward P/E is 18.21, while Papa John’s International, Inc. (NASDAQ:PZZA) trades at 13.87. Short interest as a percentage of float tells a different story and reflects the overall narratives. As of July end, Papa John’s International, Inc. (NASDAQ:PZZA)’s short interest was 24.51% while Domino’s Pizza Inc. (NASDAQ:DPZ)’s stood at 10.92%.
While Insider Monkey acknowledges the risk and potential of PZZA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than PZZA that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
