Investors looking for exposure to one pizza takeout name may want to consider Papa John's Int'l, Inc. PZZA over Domino's Pizza, Inc. DPZ, at least according to KeyBanc.

The Analyst: Eric Gonzalez initiated coverage of Papa John's with an Overweight rating and $94 price target. He initiated coverage of Domino's Pizza with a Sector Weight rating.

Papa John's: Winning A 'Fair Share'

Papa John's turnaround story started before the COVID-19 pandemic, but Gonzalez said the sudden nationwide shift to "stay at home" dining accelerated the brand's recovery. Papa John's has evolved to become a "strong challenger" in the fragment pizza restaurant segment.

Management deserves credit for reviving the brand through improved messaging, offering value, introducing technological upgrades, improving unit economics and prioritizing its people.

Recent momentum could also help reverse a trend of store closures in the U.S. as the company is now earmarking unit development as a top priority, the analyst wrote in a note. The pizza chain is offering franchisees attractive terms, especially low upfront costs of $300,000 before incentives and the potential for rising cash-on-cash returns.

Finally, Papa John's stock is up 37% in 2020 but remains undervalued versus its peers given a sustainable same-store sales growth profile and the likelihood of accelerating unit growth.

Domino's: No Room For Upside

Gonzalez said Domino's is the best-in-class franchisor across the entire restaurant industry and is backed by a long track record of same-store sales outperformance in the U.S. and around the world. The company is the top-ranked pizza chain in the U.S. and in the majority of the countries it operates in.

"The secret sauce behind Domino's success is ongoing reinvestment in its people, technology, and value platforms, and its ability to market its capabilities in speed, convenience, affordability, and quality to the end user," the analyst wrote in the note.

However, Domino's stock run-up over the past year leaves little room for more upside. Shares are up around 74% in the past year and by some metrics, it has become expensive. For example, Domino's 3% free cash flow yield is "among the most expensive" in its peer group and its PE of 32.8 times 2021 estimates is a premium to its peers and its own historical averages.

"Our preference is to wait for a more reasonable entry point," Gonzalez wrote.