BofA downgrades rating, TP on Papa John's amid turnaround doubts, tougher competition

BofA has downgraded to "underperform" shares of pizza chain Papa John's International. Among the reasons for the downgrade the analysts cited the departure of an executive, mounting competitive pressure, and a steeper-than-expected decline in sales.

BofA has downgraded its rating and target price for Papa John's, which has struggled for several years. The bank dropped its "neutral" rating to "underperform," CNBC reported. It also cut its target price by 19% to $34 per share, as financial news site Proactive Investors wrote. That is roughly in line with the stock's closing price on Monday. The shares were down another 0.5% on Tuesday as of this writing. The company's market value is off 14% year to date.

The BofA analysts revised their outlook following Ravi Thanawala's departure as Papa John's CFO on June 30. "While former CFO Ravi Thanawala's departure for AEO will allow him to return to his previous industry, we think it's unlikely he would have left his post after less than three years if he believed a sharp turnaround were imminent," they wrote, as quoted by Proactive Investors. The bank added that "the disruption that comes with management turnover – particularly at a time when Papa John's is trying to execute a turnaround – may translate into less earnings predictability."

BofA also pointed to intensifying competition across the pizza market. In the first quarter, Papa John's North America comparable sales fell 6.4% year over year, while Domino's Pizza reported 0.9% comparable sales growth over the same period. The bank expects competition to intensify further in the second quarter, leading to a steeper decline in Papa John's North America comparable sales than it had previously forecast, according to Proactive Investors. The BofA analysts also said the recent sale of Pizza Hut by Yum! Brands points to continued pressure across the sector and suggests limited upside for Papa John's shares.

Papa John's has struggled for years. Its problems began in 2017, when founder John Schnatter became embroiled in a racism controversy after using a racial slur during a conference call, according to media reports. The company's legal dispute with Schnatter lasted for around two years before he stepped down from all leadership roles. Around the same time, activist investor Starboard Value took a stake in Papa John's in 2019, helping stabilize the company's finances.

The next setback came in the wake of the pandemic and the delivery boom it fueled. Today, pizza chains are losing ground to coffee shops and Mexican-inspired fast-food restaurants.

The weaker industry backdrop has weighed on the company's financial performance. In 2025, Papa John's North America comparable sales declined at both company-owned and franchised restaurants. In February, the chain announced plans to close hundreds of U.S. locations, streamline its menu, and cut corporate jobs.

All of this comes as Qatari-backed investment firm Irth Capital has expressed interest in acquiring Papa John's. The firm made two takeover proposals in 2025-2026, though no transaction has been announced.

Wall Street has only one "underperform" rating on Papa John's, according to MarketWatch data. Most analysts remain on the sidelines: 10 recommend "hold," while six rate the stock "buy." The average target price is $37.40 per share, implying about 12% upside from the last closing price.