Shares of Papa John's (PZZA) are under pressure for a second straight day after the Wall Street Journal reported yesterday that Trian Fund Management has decided not to pursue a deal to acquire the pizza chain. Assuming no deal, Stifel analyst Chris O'Cull said investors should brace for a pullback in the stock to the low-$40s and encouraged the company's board to quickly add new members that can help guide a restaurant turnaround.

REPORT SAYS PAPA JOHN'S LOST BIDDER: Trian Fund Management was evaluating a potential bid of Papa John's but has decided not to pursue a deal, The Wall Street Journal reported last night, citing people familiar with the matter. The pizza chain is in the midst of a sale process that began in August and some bidders remain interested in potentially taking a stake, but none is currently considering buying the whole company, sources told the Journal. Binding offers for Papa Johns's are due next week, the report added.

STIFEL SAYS SHARES COULD TRADE IN LOW $40S WITHOUT DEAL: While noting that he has no knowledge of any M&A negotiations or discussions, Stifel analyst Chris O'Cull told investors that he still believes there are several obstacles a buyer would need to overcome, and a potential takeout bid would probably offer limited upside, especially after considering the arbitrage discount would likely be large given an obstinate founder owns 30% of the stock. Assuming no deal, then investors should brace for a pullback in the stock to low-$40s, he contended, adding that the board should "quickly add new members that can help guide a restaurant turnaround". O'Cull pointed out that the stock seems to be trading more on M&A chatter than fundamentals, but argued that a comprehensive longer-term plan coupled with adding fresh talent to the board could make Papa John's "a compelling 24-36 month investment prospect." Franchisees need a longer-term financial support plan given the profit declines have put many at risk of closing stores, the analyst contended, adding that he suspects middle management and support service employees are struggling to remain engaged given "they are probably reading the news headlines with some jitters about their job security".

PRICE ACTION: In morning trading, shares of Papa John's have dropped more than 6% to $48.42. Yesterday, the stock fell 10% following the Wall Street Journal's report.