Dave & Buster’s Posts Lower-Than-Feared 3Q Loss; Stock Rises 3%

Shares of Dave & Buster’s Entertainment rose 3% in Thursday’s extended trading session after the dining and entertainment company reported a lower-than-feared loss in the third quarter. However, the company’s quarterly sales fell short of the Street’s estimates.

Dave & Buster’s (PLAY) reported a 3Q loss of $1.01 per share due to the negative impact of COVID-19, but it was smaller than analysts’ expectations for a loss of $1.11 per share. In the year-ago quarter, the company had posted earnings of $0.02 per share. Dave & Buster’s reported revenues of $109.1 million that missed the Street’s estimates of $109.4 million and plunged 63.6% year-over-year.

The company’s comparable-store sales (comps) declined 66% year-over-year in 3Q. However, the comps decline rate showed signs of deceleration on a month-over-month basis. The comps decline rate was 75% in August, 62% in September and 59% in October.

Dave & Buster’s CEO Brian Jenkins said, “We believe our strong sales recovery through late October and return to store-level profitability at the majority of our re-opened stores clearly illustrates the resilience of the Dave & Buster’s brand and validates our plan for navigating through this unique environment.”

As for 4Q, the company expects comps to decline by 71%. Jenkins said, “we expect our fourth quarter sales and profitability will be significantly impacted by the recent resurgence of COVID cases and resulting operating limitations imposed by local jurisdictions.” The company further said “re-opening its California and New York stores will be delayed until early 2021.” (See PLAY stock analysis on TipRanks)

On Dec. 2, Raymond James analyst Brian Vaccaro raised the stock’s price target to $35 (36% upside potential) from $25 and maintained a Buy rating.

In a note to investors, Vaccaro said, “We expect NT [near term] results to remain volatile due to temporary closures (3P data suggests QTD comps in Nov. down ~70% including the weight of closures; 101/138 units open).” He, however, added, “positive vaccine news in recent weeks gives us increased confidence that industry trends can begin to normalize through ’21, and that investors with an eye towards ’22 can generate significant alpha over investment time horizons.”

Meanwhile, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys and 4 Holds. The average price target stands at $25.43 and implies downside potential of about 1.2% to current levels. Shares have declined about 36% year-to-date.

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