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Analysts React To Dave & Buster's Guidance Cut

Brett Hershman

Dave & Buster’s Entertainment Inc (NASDAQ: PLAY) shares are down after cutting 2019 sales guidance on Tuesday.

Raymond James analyst Brian Vaccaro said a further deterioration in comps offsets the stock’s low valuation and potential activists.

“Amusement comps (high margin) have turned incrementally negative on difficult VR/HALO comparisons while recent F&B value initiatives have failed to gain traction,” he wrote in a note.

“Management communicated several near-term initiatives to revitalize the brand, streamline costs, and work towards a more flexible new unit growth pipeline, though increased competition remains a primary headwind.”

Vaccaro downgraded the stock from Outperform to Market Perform.

See Also: Wall Street Sours On Dave & Buster's

View more earnings on PLAY

Wells Fargo analyst Jon Tower said the company’s second-quarter same-store sales results and third quarter-to-date same-stores sales did little to bolster investor confidence that a turn in the business is at hand.

Tower said unit growth is near the highest within the industry and investors have not yet been willing to award the shares a premium for this growth.

“Management appears to be heeding the investor sentiment, suggesting that the company will step-up the rigor around new store growth decisions and potentially slow down the pace of growth as soon as F2H20,” he wrote in a note.

Tower also believes the company may explore new sales channels, including hosting e-sporting events as well as potentially looking into the sports betting partnerships, similar to what Buffalo Wild Wings did recently with MGM Resorts International (NYSE: MGM). That said, “neither are likely to remedy what ails sales in the near-term,” he said.

Wells Fargo maintains a Market Perform rating with a $40 price target.

Dave & Buster’s shares traded down 6.4% to $40.92 at time of publication.

Photo credit: Mike Mozart, Flickr

Latest Ratings for PLAY

Date Firm Action From To
Sep 2019 Maintains Overweight
Sep 2019 Maintains Hold
Sep 2019 Maintains Outperform

View More Analyst Ratings for PLAY
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