U.S. Markets closed

Analyst Says Dave & Buster's On Weakness: Best-In-Class Company Could Continue To Outperform The Industry

Brett Hershman

Dave & Buster’s Entertainment, Inc. (NASDAQ: PLAY) fell sharply Wednesday following a fourth quarter results that saw disappointing comp, despite outperforming the entire industry. Earnings came ahead of consensus estimates, and same-store sales grew 3.2 percent, just short of the streets 3.7 percent target.

Following the release, Canaccord Genuity maintained a Buy rating and $67 price target on the company, saying the comp shortfall was mostly due to an unfavorable Q4 calendar shift. Dave & Buster’s did deliver a solid Q4 despite high expectations, with new unit performance remaining strong.

“We would be buyers on the weakness given best-in-class unit economics, double-digit annual unit growth, and our belief that SSS will continue to outperform the industry,” analyst Lynne Collier said.

Dave & Busters managed to outperform the Knapp-Track casual dining benchmark by 600 basis points. The company’s class of 2015 stores have been performing exceptionally well, with 52 percent cash-on-cash return in their first year of operation, but a honeymoon effect tends to have a significant effect on new Dave & Busters locations. Volumes tend to drop 10-20 percent in year two.

The firm trimmed 2017 EPS estimates slightly to $2.40, from $2.42, due to lower restaurant margins and higher deprecation, while maintaining 2018 EPS estimate of $2.72, representing a 13.3 percent growth rate.

Dave and Busters shares dropped 3.3 percent to close at $60.09.

Related Links:

Dave & Buster's 'Disappointing' Comps Still Managed To Outperform The Entire Industry In Q4

A Peek Into The Markets: U.S. Stock Futures Mostly Lower Ahead Of Fed Speakers

Latest Ratings for PLAY

Date Firm Action From To
Mar 2017 Maxim Group Initiates Coverage On Buy
Dec 2016 SunTrust Robinson Humphrey Initiates Coverage On Buy
Oct 2016 Wells Fargo Initiates Coverage On Outperform

View More Analyst Ratings for PLAY
View the Latest Analyst Ratings

See more from Benzinga

© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.