Dave & Buster’s Entertainment, Inc. (PLAY) reported mixed third-quarter results, with earnings exceeding estimates and revenue missing estimates. Following the news, shares rose 3.9% during the extended trading session on December 7.
PLAY is the owner and operator of entertainment and dining venues in North America. Its shares have gained 30.5% over the past year.
Mixed Results
The company posted earnings of $0.21 per share, 7 cents better than analysts’ estimates of $0.14 per share. In the prior-year quarter, PLAY posted a quarterly loss of $1.01 per share.
Furthermore, revenue jumped a whopping 191.6% year-over-year to $317.98 million, yet failed to miss analyst estimates of $324.16 million. The company had 143 operating stores at quarter-end.
The company’s Board also announced a $100 million share buyback program.
Management Comments
The Interim CEO of Dave & Buster’s, Kevin Sheehan, said, “Since assuming the role, I have been impressed with our team’s hard work and dedication to operating in this evolving environment. I am excited to be working with them as we look forward to more normalized operations across our stores.”
Sheehan added, “We have begun a new phase of innovation, growth, and value creation with a focus on realizing the Company’s significant upside potential. I am excited about the future and look forward to sharing our progress with all of our stakeholders.”
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Analysts’ View
Responding to Dave & Buster’s quarterly performance, analyst Chris O’Cull of Stifel Nicolaus said, “We struggle to see meaningful EBITDA growth beyond 2022 without assuming significant unit expansion, which we are unwilling to underwrite. We acknowledge the stock’s valuation multiple is low (6.0x EV/EBITDA near term margin), but it is also based on record-level projections for 2022. We are not confident those projections can be achieved in the current environment or that the valuation will re-rate without better visibility to unit growth.”
The analyst is concerned about the current pandemic-related situation, which is a persistent headwind for the entertainment and dining sector. According to O’Cull, these pandemic-related restrictions and shifting consumer behavior may hamper PLAY’s sales recovery going forward. He believes the stock is fairly valued at its current valuation.
O’Cull maintained a Hold rating and a $40 price target on the stock, which implies 20.9% upside potential to current levels.
With 6 Buys, 2 Holds, and 1 Sell, the PLAY stock has a Moderate Buy consensus rating. The average Dave & Buster’s price target of $47.43 implies 43.29% upside potential to current levels.
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