Happy Sunday to everyone on The Street. 

Today’s newsletter is a bit like today’s playoff games. Well, okay, not really at all. But it would go great with a pizza.

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Can Domino’s Deliver This Year?

Let the Dominoes Fall

Domino’s Pizza (DPZ) did not deliver in 2024. The company returned little more than 3% last year, compared to the S&P 500’s return of more than 23%.

The pizza chain fell victim to a bad year for the broader restaurant industry. Consumer spending suffered from inflationary pressures, and Domino’s same-store sales growth hit a paltry 1.5% in Q3. 

But that may have had more to do with macroeconomic challenges than mismanagement. And with inflation now holding steady below 3%, Evercore’s (EVR) David Palmer believes the dominoes could fall in Domino’s favor.

Cutting-Edge, Competitive Edge

The analyst forecasts 2% US comparable sales growth for Domino’s in Q4, highlighting Domino’s resilience against steeper declines at Papa John’s (PZZA) and Pizza Hut (YUM).

Domino’s competitive edge is staying cutting-edge. Palmer says the chain is leveraging technology to stay ahead of the curve, widening its reach via recent partnerships with Uber Eats (UBER) and DoorDash (DASH).

The former has already boosted customer acquisition, while the latter is launching in late 2025 and expected to add further momentum to the company’s successful technological push. Domino’s proprietary app boasts millions of active users.

Hungry for More

Sluggish overseas economies and a strong dollar have also been recent headwinds for the company. International markets comprise roughly two-thirds of Domino’s store base.

But Wall Street analysts foresee recovery there, as central banks across the globe cut rates in 2025. And Domino’s plans to take advantage. Its “Hungry for MORE” strategy aims for 5% annual store growth, targeting 25,500 locations by 2028. 

Analysts expect earnings per share to grow by 6% in 2025 and 10% in 2026. RBC’s (RY) Logan Reich called the stock’s current valuation attractive, while assigning a $500 price target, implying 17% upside from its current price.

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What’s in UBS’s Wallet?

Capital One Gets a UBS Boost

Capital One (COF) got some bad press this week, when an outage at a third-party vendor impacted thousands of customers’ ability to make deposits.

That short-term snafu overshadowed — but did not shake — UBS’s (UBS) long-term conviction on the stock.

The Swiss bank’s analyst Erika Najarian upgraded Capital One from Neutral to Buy last week, raising its price target by $67 to $235, reflecting around 23% upside from Friday’s close.

The source of her bullishness: Capital One’s looming $35.3 billion acquisition of Discover Financial Services (DFS).

Payments Powerhouse

The analyst isn’t just bullish on Capital One, but its acquisition target as well. Discover’s rating also jumped to Buy, with a price target of $239, signaling upside of more than 27%.

Najarian highlighted the deal’s potential to create a vertically integrated payments powerhouse. By leveraging Discover’s credit and debit networks, she argues, Capital One could generate revenues without adding credit risk, while simultaneously reducing funding costs.

The analyst believes the deal will make Capital One more competitive, not only with its credit card rivals like Visa (V) and Mastercard (MA), but also within the broader banking space, positioning it to challenge the likes of JPMorgan (JPM), Bank of America (BAC), and Wells Fargo (WFC).

Earnings Growth on the Horizon

Najarian sees substantial earnings potential for Capital One, forecasting annual EPS in the mid-$20 to $30 range, far above the 2024 estimate of $14.

The analyst also expects operating efficiency to hit 35% by 2027, a significant improvement from current levels.

Najarian’s optimism stands out, as only 10 of 23 analysts rate Capital One a Buy. But her track record makes it a take worth noting. Najarian has a 57% success rate, and her ratings yield an average return of more than 10%, according to TipRanks.

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A Bond Selloff Sparks Opportunity

Wall Street’s Bond Anxiety

The bond market is under pressure. 10-year Treasury yields peaked around 4.8% this week, and ended the day Friday above 4.6%.

Rising term premiums driven by concerns over President-elect Donald Trump’s tariff policies and budget deficits are the driving factors behind the rise.

To hear the Street tell it, this is bad news. But it might be an attractive buying opportunity for risk-averse investors.

A Rare Bear Steepening

The yield curve has steepened, but not in the usual way.

Instead of falling short-term yields, longer-term bonds have sold off more — a rare example of the phenomenon economists call “bear steepening.”

The Federal Reserve is signaling prolonged higher rates, and markets are pricing in just a handful of small interest rate cuts this year. As a result, fixed-income investors demand greater term premiums, pushing up long-term yields.

In other words, the rising yields don’t seem to signal that investors are bullish about the economy’s long-term growth, but rather that they’re applying a discount to hold long-term bonds.

This pattern echoes the stagflation periods of the 1970s and 1980s, although the curve remains less steep than historical norms.

Bonds vs. Overvalued Stocks

At 4.6%, 10-year Treasury yields are roughly equal to the S&P 500’s one-year forward earnings yield, according to the Wall Street Journal — and that’s even if economists’ most optimistic outlooks for 2025 come to pass.

So basically, stock prices are quite high after back-to-back annual gains of more than 20%. Consequently, investors increasingly view bonds as viable competition to equities, especially for medium-term investments.

And while yields could rise further, any significant economic slowdown might prompt central banks to shift to stimulus mode, making bonds the clear winner in such a scenario.

Last Week’s Poll Results

Are you bullish or bearish on Academy Sports & Outdoors (ASO) over the next 12 months?

🟨🟨🟨🟨🟨⬜️ 🐂 Bullish

🟩🟩🟩🟩🟩🟩 🐻 Bearish

And, in response, you said:

• 🐻 Bearish — “I think they'll have a hard time matching up or even equaling what Dicks has done.”

Are you bullish or bearish on the healthcare sector in 2025?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨⬜️⬜️⬜️⬜️ 🐻 Bearish

And, in response, you said:

• 🐂 Bullish — “It’s now their time to shine.”

• 🐻 Bearish — “Kennedy is enough for me to avoid losing money on health care.”