The stock of Papa John’s (PZZA) is down 10% on reports that Apollo Global (APO) has withdrawn its offer to take the pizza chain private.
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The private equity firm has reportedly had second thoughts about its bid to take Papa John’s private at $64 per share. Apollo previously submitted an offer for Papa John’s along with fellow private equity firm Irth Capital Management.
News that the take-private deal is off the table comes before Papa John’s is due to report its third-quarter financial results on Nov. 6. There is also mounting evidence of a spending pullback as restaurants and other consumer-facing companies report sluggish sales with the U.S. economy slowing down.
Restaurant Sector
A week ago, Chipotle Mexican Grill (CMG) reported a 0.8% traffic decline, the third consecutive quarter of decreases amid a pullback in consumer spending on eating out and other discretionary items. Also recently, consumer goods giant Procter & Gamble (PG) reported that its lower-income customers are significantly reining in their spending.
News that Papa John’s might not be taken private by Apollo Global arrives on the same day that Yum Brands (YUM) said it plans to review strategic options for the Pizza Hut restaurant chain that it owns, including a potential sale of the struggling chain.
Is PZZA Stock a Buy?
The stock of Papa John’s has a consensus Moderate Buy rating among 10 Wall Street analysts. That rating is based on three Buy and seven Hold recommendations issued in the last three months. The average PZZA price target of $52.29 implies 21.18% upside from current levels.
