Domino's Pizza (DMP): Now the Most Shorted Stock on the ASX Despite 84% Rally
Domino's has taken the #1 most shorted spot at 17.3% short interest, even as the stock has rallied 84% from its lows. With a squeeze score of 85 and 38 days to cover, is this a turnaround story shorts are getting wrong?
Domino's Pizza Enterprises (DMP) has claimed the dubious honour of becoming the #1 most shorted stock on the ASX, surpassing uranium miners and embattled retailers. With 17.3% of shares sold short, bears are betting heavily against Australia's largest pizza franchise operator. But here's the twist: the stock has rallied 84% from its 52-week lows and appears to be in the midst of a genuine turnaround.
The Paradox: Most Shorted Yet Rallying
DMP's current situation presents a fascinating market paradox:
| Metric | Value |
|---|---|
| Short Interest | 17.32% |
| Rank | #1 Most Shorted on ASX |
| Short Position | 16.4 million shares |
| Short Liability | $395.5 million AUD |
| Current Price | $24.13 |
| 52-Week Low | $13.11 |
| 52-Week High | $36.68 |
| Rally from Low | +84% |
| Distance from High | -34% |
Shorts have piled into DMP even as the stock has nearly doubled from its lows. This creates a dangerous setup for bears - they're fighting a stock with clear upward momentum.
The Short Interest Story
DMP's journey to becoming the most shorted stock has been remarkable. A year ago, short interest sat at around 13.4%. Since then, shorts have added 4 percentage points to their positions, even as the stock mounted its recovery.
Key Short Metrics
| Metric | Value | Implication |
|---|---|---|
| Days to Cover | 38.2 days | Extremely difficult to exit |
| Squeeze Score | 84.84/100 | Very high squeeze potential |
| Short Position Change (1yr) | +3.9% | Shorts still adding |
The 38.2 days to cover is extraordinary - it would take nearly two months of average trading volume for all shorts to exit their positions. This creates severe liquidity risk for bears if the stock continues higher.
The Turnaround Story
Domino's has been through a turbulent period that attracted short sellers in the first place:
What Went Wrong (2022-2024)
- Post-COVID Hangover: Same-store sales declined as the pandemic dining boom faded
- Cost Pressures: Labour costs, ingredient inflation, and energy prices squeezed margins
- Franchisee Struggles: Store closures and franchisee profitability concerns
- Leadership Turmoil: CEO Don Meij stepped down after two decades; his successor Mark van Dyck quit after just eight months
- Debt Concerns: High debt-to-equity ratio of 223% raised refinancing risks
What's Changing (2025-2026)
- New Leadership: Fresh management team with Australia/NZ CEO appointment and expanded CFO role
- Franchisee Profitability: Recent reports show improving franchisee economics
- Debt Refinancing: Successful restructuring of debt facilities reduces near-term risk
- Private Equity Interest: Speculation of PE interest drove a 48% rally in one month
- Broker Upgrades: Morgans and UBS maintain buy ratings, citing attractive valuations
A broker note highlighted that "the stock is still only trading on a FY26F PE of 16x which is a ~30% discount to Collins Foods Ltd" - suggesting significant upside if the turnaround continues.
Valuation: Cheap or Value Trap?
DMP's current valuation metrics tell an interesting story:
| Metric | Value | Assessment |
|---|---|---|
| P/E Ratio | 16.8x | Reasonable for growth stock |
| P/B Ratio | 3.4x | Below historical average |
| Dividend Yield | 3.19% | Attractive income |
| Market Cap | $2.28 billion | Mid-cap territory |
| Beta | 0.96 | Moves with market |
Analyst price targets range from $13.00 to $30.00, with one DCF model suggesting fair value around $26.07 - about 8% above current levels.
The Squeeze Setup
DMP ranks exceptionally high on our squeeze candidate metrics:
Squeeze Score Breakdown
| Component | Score | What It Means |
|---|---|---|
| Overall Squeeze Score | 84.84 | Top decile potential |
| Days to Cover | 38.2 | Extremely high - shorts trapped |
| Short Interest | 17.32% | Highest on ASX |
| Price Momentum (5d) | +0.67% | Positive but modest |
Why This Setup Is Dangerous for Shorts
Trapped Positions: With 38 days to cover, shorts cannot exit quickly without moving the price significantly against themselves
Improving Fundamentals: Each positive news item (earnings beat, store growth, margin improvement) forces shorts to reconsider their thesis
Technical Breakout Potential: The stock has recovered 84% from lows and is establishing higher lows - a bullish pattern
Dividend Pressure: The 3.19% dividend yield means shorts must pay to maintain positions
Catalyst Rich Calendar: Upcoming earnings, potential further broker upgrades, and M&A speculation provide multiple potential triggers
Institutional Lending Activity
Our data shows significant securities lending activity around DMP:
| Metric | Value |
|---|---|
| Total Borrowed | 7.7 million shares |
| Total in Lending Pool | 12.1 million shares |
| Unique Borrowers | 21 institutions |
| Unique Lenders | 64 institutions |
Top Borrowers (Enabling Short Positions)
- Citibank, N.A. Sydney Branch: 3.9 million shares
- State Street Bank: 2.1 million shares combined
- Citigroup Global Markets: 775k shares
The high number of lenders (64) versus borrowers (21) suggests adequate supply of shares to borrow - shorts are not yet facing a borrow squeeze. However, if demand to short increases further, this could tighten.
The Bear Case: Why Shorts Are Betting Against DMP
To be fair, shorts have legitimate concerns:
Consumer Discretionary Risk: Economic uncertainty and cost-of-living pressures could hurt pizza sales
Competition: Uber Eats, DoorDash, and other delivery platforms compete for share
International Exposure: Operations in Japan, France, Germany, and other markets add currency and execution risk
Debt Load: 223% debt-to-equity ratio is concerning if interest rates stay high
Historic Missteps: The company has disappointed before - this could be a dead cat bounce
What to Watch
Near-Term Catalysts
- H1 FY2026 Results: Sales growth and margin trends will be closely watched
- Same-Store Sales Data: Any return to growth would validate the turnaround
- Franchisee Metrics: Continued improvement in franchisee profitability
- M&A Speculation: Any concrete PE interest could trigger a squeeze
Key Levels
| Level | Price | Significance |
|---|---|---|
| Support | ~$20 | Recent consolidation zone |
| Resistance | ~$30 | Psychological level, analyst targets |
| 52-Week High | $36.68 | Full recovery target |
Conclusion: A High-Stakes Standoff
Domino's Pizza presents one of the most interesting setups on the ASX:
- Highest short interest on the entire exchange at 17.3%
- Yet up 84% from lows with improving fundamentals
- Squeeze score of 85 puts it in the top tier of candidates
- 38 days to cover means shorts are severely trapped if wrong
The market is essentially split between those who believe the turnaround is real and those betting it will fail. With short interest at record levels while the stock rallies, someone is going to be very wrong.
If DMP continues to execute on its turnaround and delivers solid results, the combination of short covering and renewed investor interest could drive the stock significantly higher. If the turnaround stumbles, shorts will be vindicated.
Either way, this is a stock worth watching closely in 2026.
Disclaimer: This blog post is for informational and educational purposes only and is not financial advice. The information provided is based on data available as of 2026-01-23. Domino's Pizza Enterprises is a volatile stock with significant short interest, and trading in such securities carries substantial risk. Short selling data reflects positions as of the report date and changes daily. You should conduct your own thorough research and consult with a qualified financial professional before making any investment decisions. ASXShort.app does not guarantee the accuracy or completeness of the data presented, nor does it guarantee future stock performance.
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