A brand new addition to the menu at Domino’s Pizza’s might translate into huge good points for shares of potato producer Lamb Weston , in line with Bank of America. One day after Domino’s introduced the nationwide roll out out of “Loaded Tots,” Bank of America analyst Peter Galbo reiterated a purchase ranking on Lamb Weston shares, and repeated a 12-month worth goal of $115 on the Idaho-based firm’s inventory, implying 16% upside from Tuesday’s closing worth. Lamb Weston, whose shares have already risen about 11% in 2023, stands to learn from the Domino’s transfer, Bank of America stated. It’s the biggest producer of frozen potato merchandise in North America with a 43% market share. Although the financial institution doesn’t view the tater tots as incremental to Lamb Weston’s monetary outlook for the present fiscal yr, Galbo wrote that the potato processor lately added 50 million kilos to its capability for chopped and shaped potato merchandise, similar to hash browns and tater tots, with a purpose to help elevated demand. Potatoes are on 83% of menus in fast-casual eating places throughout the U.S., in line with a 2021 PotatoesUSA survey . Bank of America expects that to extend with Domino’s tater tots launch, including that tight potato provide and restricted capability development helps a “longer-term bull case” for Lamb Weston earnings. “We expect strong demand for Loaded Tots as consumers look for shareables they can add to their existing orders,” Galbo wrote in a analysis report Tuesday. “We view the Tots launch as the start of a renewed product innovation cycle that will drive higher ticket, customer trial and frequency.” The tater tots are already out there in some shops and can be rolled out nationally later this month, with some clients in a position to get their arms on them in time for the Super Bowl on Sunday. The tots will arrive frozen and be oven-baked within the retailer, reasonably than fried, earlier than being topped. Domino’s is providing the tots in three varieties: Philly Cheese Steak, Cheddar Bacon and Melty 3-Cheese. The launch comes after Domino’s had paused its regular promotional exercise and delayed introducing new merchandise in the course of the pandemic, when it as an alternative targeted on maximizing current operations. Galbo estimates the tater tots might elevate Domino’s retail gross sales by about 2% of their first yr. Bank of America additionally reiterated Domino’s as a purchase with a a $448 worth goal, suggesting upside of 25% from its closing worth on Tuesday. Shares of the chain are up about 2% this yr. Note to clients. The Loaded Tots do not essentially come promotionally low cost: they’re priced at $6.99.
