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A Big Q4 Report Confirms the PLAY Stock Comeback Story

James Brumley

Dave & Buster’s Entertainment (NASDAQ:PLAY) reported a much-needed quarterly win after Tuesday’s closing bell rang, sending PLAY stock up more than 5% on after-hours trading.

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For the recently ended quarter, Dave & Buster’s turned $331.8 million worth of revenue into an operating profit of 66 cents per share. Analysts were calling for earnings of 63 cents per share of PLAY stock on sales of $323.3 million. Last quarter’s top and bottom lines compared favorably to year-ago levels as well. Sales grew 15.7%, while adjusted EBITDA improved 1.2%.

Same-store sales were up 2.9%, bringing an end to five straight quarters of same-store sales declines.

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PLAY Stock Quarterly Results

The quarterly report exceeds an update tendered halfway through January. The update indicated the “eatertainment” chain of 125 restaurants got the three-month stretch started on the right foot.

That mid-January report indicated same-store sales growth of between 1.8% and 2.5% for the fourth quarter would translate into a full-year same-store sales dip of between 1.7% and 1.9%. For all of fiscal 2018, same-store sales were down only 1.6%.

CEO Brian Jenkins said:

“We are pleased to finish the year on a strong note. On a comparable week basis, we drove double-digit revenue growth in Q4 as comparable store sales increased 2.9% and new store performance remained strong. 2018 was another year of record sales and EBITDA, and looking ahead to 2019, we are well positioned to deliver new revenue and EBITDA highs…We are excited our Board has authorized to expand our share repurchase program by another $200 million.”

Perspective

The recently-ended quarter was a much-needed sigh of relief for owners of PLAY stock.

Once an unstoppable growth machine, a myriad of alternative forms of entertainment and dining have put pressure on Dave & Buster’s Entertainment.

These alternatives range from Netflix (NASDAQ:NFLX) to healthier at-home meal kits from Blue Apron (NYSE:APRN) to cost-effective mobile gaming, each of which contributes to a collective headwind. Not only have same-store sales been in decline, increasingly, it costs more to keep patrons coming back to locales they’ve visited before, while regular customers are becoming less and less regular.

The company has sought to offset this shift by ramping up virtual reality, or VR, experiences at its restaurants. Last quarter it introduced a new VR Star Trek game at select locations, aiming to build on the success of last year’s virtual reality Jurassic Park-themed game. It also unveiled its first proprietary game, Dragonfrost, in December.

Such immersive games offer an experience most consumers can’t enjoy anywhere else. They also prove lucrative for the company, which gets more than half of its revenue from amusements. Costs, however, continue to rise at a faster clip than the top line. The robust economy has forced wages upward, with Dave & Buster’s payroll costs growing nearly 16%. ‘Other store operating expenses,’ which would include games and costs linked to them, grew nearly 15%.

Looking Ahead for PLAY Stock

For the year now underway, the company is anticipating sales of between $1.37 billion and $1.4 billion, versus a consensus estimate of $1.38 billion. Moreover, Dave & Buster’s had modeled same-store sales growth to roll in at even or as much as 1.5% for 2019.

That fanned the bullish flames that sent shares higher after Tuesday’s close, although it’s possible PLAY stock was going to move higher anyway. March’s low was made by an encounter with a technical floor that touched all the key lows since mid-2018. Falling resistance lines have now also been breached thanks to net-bullishness.


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Tuesday’s post-close gain has also pushed Dave & Buster’s stock above the 200-day moving average line, plotted in white, at $53.07. The big jump, however, has also left behind a gap the bears may try to fill in before allowing PLAY stock to make any more forward progress.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.

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