Domino’s Pizza (DPZ) stock remains over 14% below our target price of $498 as shown in my Oct. 17 Barchart article. Moreover, selling short out-of-the-money (OTM) put options is one profitable way to play it.
I discussed this income-producing play in a follow-up Nov. 18 article, suggesting selling short the $390 strike price put expiring Dec. 19 for a one-month 1.667% yield (i.e., $6.50/$390.00).
Today, DPZ stock is well over that strike price at $435.31 with 5 days left until expiry. So, this short-put play has worked well, as the put premium has fallen to just 18 cents at the midpoint.
That implies that investors can roll this trade over and do a new short-put one-month out play. But first, let’s review DPZ’s price targets to provide confidence that this is a good play.
In my Oct. 17 Barchart article, I discussed Domino’s strong Q3 performance. That included its 14.56% fQ3 free cash flow (FCF) margin compared to 11.5% a year ago.
As a result, using analysts’ revenue estimates, I projected that Domino’s would generate $755 million in FCF over the next 12 months (NTM).
And, using a 4.50% FCF yield metric, that works out to a projected market value of $16.777 billion (i.e., $755/0.045).
Today, according to Yahoo! Finance, DPZ has a market cap of just $14.786 billion. That implies the value of DPZ could rise by +13.47% (i.e., $16.777b/$14.786b).
In other words, DPZ could be worth $493.92 per share (i.e., 1.13465 x $435.31).
Other analysts agree. For example, Yahoo! Finance reports that 34 analysts have an average price target (PT) of $496.65. And Barchart’s mean survey PT is $500.53.
Similarly, AnaChart.com, which tracks recent analyst write-ups, shows that 22 analysts have an average PT of $493.53.
The bottom line, then, is that DPZ looks cheap here. That makes it ideal for short-sellers of out-of-the-money (OTM) puts.
For example, the Jan. 16, 2026, expiry period, 32 days from today, shows that the $420.00 strike price put option contract has a midpoint premium of $6.05.
That strike price is over 3% below today’s price and provides a potentially lower buy-in point. Moreover, the short-seller of this contract makes an immediate yield of 1.44% (i.e., $6.05/$420.00).
