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Buy Dave & Buster's Stock Before Earnings as a Reopening Play?

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The coronavirus crushed the hospitality industry amid forced closures, capacity restrictions, and more. Arcade and game-focused Dave & Buster's Entertainment, Inc. PLAY was hit particularly hard due to its in-person gaming focus and limited carryout presence.

Despite the nearly impossible conditions during the past year-plus, PLAY stock soared around 300% since its lows last year. With this in mind, let’s take a quick look at Dave & Buster's to see if investors might want to consider buying the stock as a reopening play before it reports its Q1 FY21 financial results on Thursday, June 10.

PLAY Overview

Dave & Buster's owns and operates 141 locations in North America where it combines a restaurant, bar, and arcade all in one. The company’s tagline is “Eat Drink Play and Watch,” all in one location. PLAY had posted solid revenue growth since going public in 2014. But the coronavirus put a halt to much of its business seemingly overnight, as it did with casino operators, concert venues, and other in-person entertainment businesses.

PLAY’s 2020 revenue tumbled 68% from $1.36 billion to $437 million, and things remained rough even in the second-half of last year, with sales down 66% in the fourth quarter. At the start of Q4, only 74% of Dave & Buster's were open. Even by the beginning of the first quarter, only 76% of its stores had reopened.

Luckily, the U.S. economic reopening has started to kick into high-gear amid the vaccine rollout. The company provided updated first quarter guidance on April 20 and announced that as of April 18, it had “reopened 138 stores, or approximately 98% of its 141-store base.” Yet PLAY did note at the time that “most locations continue to operate under reduced hours and capacity limitations.”

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Next?

With this in mind, Zacks estimates call for Dave & Buster's revenue to jump 60% for the three-month period ended on May 2. Meanwhile, it is expected to cut its adjusted loss from -$1.37 a share to -$0.13. For the full-year, PLAY’s revenue is projected to climb 165% to $1.16 billion, with FY22 set to jump another 30% to climb above its pre-coronavirus high at $1.50 billion.

On the bottom-line PLAY’s is expected to soar from an adjusted loss of -$4.70 a share to +$0.29, with FY22 projected to skyrocketed 680% to $2.26 a share. And these estimates could improve as many of the biggest cities around the country are heading to a complete reopening with hardly any restrictions.

Bottom Line

Dave & Buster's lands a Zacks Rank #3 (Hold) right now, alongside an “A” grade for Momentum in our Style Scores system and its industry sits in the top 35% of over 250 Zacks industries. PLAY closed regular trading Friday at $41.32 a share, which put it nearly 20% below its 52-week highs from March.

The chart also showcases that PLAY still trades 40% under its 2017 peak. Plus, its recent pullback has it below neutral RSI levels (50) at 42. All of this provides Dave & Buster’s ample room to run, especially if previously-cooped up customers return in droves ready to spend.

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Dave & Busters Entertainment, Inc. (PLAY) : Free Stock Analysis Report

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