Dave & Buster’s Paces Past 2Q Estimates Despite COVID-19 Headwinds

Dave & Buster’s Entertainment reported better-than-expected 2Q results despite the negative impact of the COVID-19 pandemic on its restaurant and entertainment business.

Dave & Buster’s (PLAY) reported a GAAP loss of $1.19 per share for the quarter, which fared better than the Street’s estimates of a loss of $1.27 per share. However, the bottom-line result compared unfavorably with the year-ago quarter’s earnings of $0.80 per share.

4Q revenues plunged 66.4% to $116.8 million year-on-year but topped the Street’s estimates of $102 million. The company’s overall comparable-store sales tanked 70% during the quarter. Moreover, comparable store sales at its fully operational stores were about 52% of 2019 sales.

Dave & Buster’s CEO Brian Jenkins said that the company is witnessing a recovery in its business. He noted that its fully operational stores achieved 74% of 2019 comparable-store sales level during the first eight weeks of 1Q with total sales of about $150 million. (See Dave & Buster’s Entertainment stock analysis on TipRanks)

Based on the company’s preliminary results for the first eight weeks, Dave & Buster’s expects to generate revenues of between $210 million and $220 million in 1Q.

On March 24, Raymond James analyst Brian Vaccaro reiterated a Buy rating and price target of $55 (14.8% upside potential) on the stock. In a note to investors, Vaccaro wrote that we “believe the stock’s recent pullback creates an attractive entry point. While we see modest upside to 4Q expectations, we’ll be more focused on 1) QTD sales which we believe have shown solid sequential improvement through March and 2) incremental details regarding store margin performance in top-quartile AUV units and/or efficiencies/cost savings realized during COVID.”

Overall, the rest of the Street has a Moderate Buy consensus rating based on 3 Buys, 2 Holds and 1 Sell. The average analyst price target of $41.17 implies downside potential of about 14.1% to current levels. Shares have gained 266.2% in one year.

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