Warren Buffett’s Berkshire Hathaway has sold more than two-thirds of its stake in Apple since the third quarter of 2023, reducing its position by 69%. Concurrently, the investment firm has been building a small position in Domino’s Pizza, making purchases for the third consecutive quarter.
Despite Berkshire’s sales, Apple reported strong financial results in its June quarter. Revenue grew 10% to $94 billion, its fastest pace since 2021, driven by robust iPhone and services segment performance. This resulted in a 12% increase in GAAP earnings to $1.57 per diluted share. Apple’s investment appeal lies in its powerful brand authority, stemming from its design expertise, which commands significant pricing power. The company leads the smartphone market, with its average iPhone selling for three times more than the average Samsung device.
However, Apple faces significant headwinds. The Digital Markets Act in Europe now requires the company to permit third-party app stores, which could negatively impact its services revenue. Additionally, an ongoing antitrust lawsuit involving Alphabet could limit Apple’s ability to collect fees for making Google the default search engine, potentially trimming pre-tax profits by 7%, according to Jefferies analysts. Compounding these issues is a high valuation. With the stock trading at 35 times earnings and Wall Street forecasting 10% annual earnings growth, its price-to-earnings-to-growth (PEG) ratio stands at 3.5, a considerable premium over tech peers like Amazon, Nvidia, and Alphabet, whose ratios are below 2.
In contrast, Domino’s Pizza also reported encouraging second-quarter results. Revenue increased 4% to $1.1 billion, supported by 3.4% same-store sales growth and 178 net new store openings. While GAAP earnings declined 6% due to losses on strategic investments, operating income, a more direct measure of performance, rose 15% to $225 million.
As the world’s largest pizza company by sales, Domino’s strengths are its scale and brand recognition, bolstered by technological innovation like using AI for quality control. This has allowed its same-store sales to consistently outperform major competitors. The company’s “Hungry for More” strategy aims for 7% annual retail sales growth and 8% annual operating income growth through 2028 by adding 5,500 new stores and driving customer engagement with menu innovations and promotions. CEO Russ Weiner confirmed the strategy’s success, highlighting new product popularity and integrations with DoorDash and Uber to expand market awareness.
Domino’s stock trades at 27 times earnings, with analysts projecting 10% annual earnings growth over the next three years. While this valuation is not considered cheap, Berkshire Hathaway’s position in the company remains very small, constituting less than 1% of its total portfolio.
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