Dave and Buster’s Reports Better Than Expected Earnings

Dave and Buster’s Entertainment, Inc. (Ticker Symbol: PLAY) released its second-quarter earnings earlier this week that were better than expected while lowering its revenues for the year below previous forecasts. The restaurant chain reported an earnings per share beat of $.90 cents per share vs. Wall Street analysts’ expectations of .85 cents per share.  In addition, Dave and Buster’s net revenue exceeded Wall Street’s expectations reporting a revenue of $344.6 million vs. analysts’ estimates of $297.2 million.

Comparable store sales fell 1.8% for the quarter led by a decline in walk-in revenues. Dave and Buster’s forecasted a decline in its same-store sales and expects them to now fall in a range of a decline of 3.5% to 2.0% vs. the previously forecasted range of a decline of 1.5% to .05%.  The company also lowered its revenue forecast for the year to a range between $1.338 to $1.359 billion from the previous range of $1.365 to $1.390 billion.

Above is a two-and-a-half year chart of Dave and Buster’s Stock. Dave and Buster’s stock had a very strong start in 2017 eventually rallying over 40% trading to an all-time high on June 8th, 2017 at the price of $73.48. Unfortunately for shareholders, the stock took a rough turn to the downside, led by weak earnings and guidance reports from the remainder 2017 and into 2018.   In the first quarter of 2018, the stock gapped down over 11% to set off a negative start to the year.  Dave and Buster’s proceeded to sell-off over the next quarter, before finding some price support around the $38.00 price level.  The company’s stock then rallied over 20% led by a strong earnings report in the second quarter of 2018.

Dave and Buster’s found some support at its 200-day moving average where it formed a “double bottom” reversal pattern. Dave and Buster’s stock broke out of this pattern to the upside rallying nearly 25% before putting in a “head and shoulders” topping formation. Traders and investors sometimes look at “head and shoulders” patterns for a possible pause within the current trend, which can at times lead to a reversal as occurred in Dave and Buster’s case.  Dave and Buster’s stock was positive for the year so far in 2019 until the negative earnings and guidance release in the second quarter sent the stock gapping lower over 20% turning the stock negative for the year.  Currently, Dave and Buster’s is trying to find some footing and coming off the lows of the year.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 11 analysts offering 12-month price targets, the average price target for Dave and Buster’s stock is $45.13. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $41.40.

Dave and Buster’s is currently in the midst of a $100 million stock buyback program that it announced late in 2018.  The stock repurchase program will help put some underlying support in the price of the stock, but the company still guided for lower revenues the remainder of the year.

Investors in Dave and Buster’s should look to their next earnings release on December 11th for fresh news within the company.