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3 Bulls React To Dave & Buster's Q4 Earnings

Jayson Derrick

Entertainment and dining venue company Dave & Buster's Entertainment Inc (NASDAQ: PLAY) reported fourth-quarter results that came in better than the higher-end of management's own expectations. Here is a summary of how three analysts reacted to the print.

The Analysts

  • BMO Capital Markets' Andrew Strelzik maintains an Outperform rating on Dave & Buster's with a price target lifted from $62 to $66.
  • Wells Fargo's Jon Tower maintains at Outperform, price target lifted from $59 to $60.
  • Raymond James' Brian Vaccaro maintains at Outperform with a $60 price target.

BMO: Top-Line Stabilization

Dave & Buster's' management offered several fourth quarter metrics in January but the company outperformed the high-end ranges across same-store sales, revenue, EBITDA and net income, Strelzik said in a research report. Comps came in at a mid-single digit for the first time in six quarters, while food and beverage comps were positive for the first time in two years.

Management said same-store sales remain positive through the seven weeks of the first quarter 2019 and a 1-percent run rate is a "reasonable baseline" to assume for the quarter, the analyst highlighted. This should be seen as another sign the company is stabilizing comps while management's revenue and EBITDA guidance is likely conservative.

Wells Fargo: 'Resilient' Cash Flows

Dave & Buster's' business continues to face operating risks but its underlying cash flows remain "resilient," Tower said. Specifically, the company was able to increase its share buyback authorization, maintain its dividend, and grow its total units by more than 12 percent in fiscal 2019.

The stock remains attractive at 15.9 times 2019 estimated P/E, 7.8 times 2019 estimated EBITDA and 5.3 percent free cash flow yield. These are all favorable compared to the growth peer set average of 40.1 times, 18.4 times, and 4.8 percent, respectively. As such, the stock remains one of the research firm's top picks.

Raymond James: 3 Concerns

Dave & Buster's report was "solid" and management's outlook was "good enough," Baccaro said. But there are three concerns investors may want to keep in mind:

  1. Year-over-year comparisons will become more difficult throughout 2019;
  2. The competitive landscape continues to grow; and
  3. Management reduced the low-end of its 2019 EBITDA guidance from up a mid-to-high-single digit to 2-7 percent.

Price Action

Dave & Buster's traded higher by 5.3 percent at $53.14 Wednesday afternoon.

View more earnings on PLAY

Related Links:

What To Do With Dave & Buster's Now?

Dave & Buster's Challenges Persist, But Jefferies Says Its Valuation Can't Be Ignored

Photo credit: Michael Rivera, Wikimedia Commons

Latest Ratings for PLAY

Date Firm Action From To
Apr 2019 Wells Fargo Maintains Outperform Outperform
Apr 2019 BMO Capital Maintains Outperform Outperform
Dec 2018 Raymond James Maintains Outperform Outperform

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View the Latest Analyst Ratings

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