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Dave & Buster's (PLAY) Shares Up 43% YTD: More Room to Run?

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Zacks Equity Research
·4 min read
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Dave & Buster's Entertainment, Inc. PLAY is poised to benefit from store re-opening initiatives, digital efforts and amusement business. This along with focus on virtual kitchen concepts, optimizing back-of-the-house operations and menu enhancements have been the primary factors for sales improvement in the last few quarters.

Notably, shares of Dave & Buster's have outperformed the industry so far this year. The stock has gained 42.8% against the industry’s 10.4% growth. Moreover, an upward revision in earnings estimates for fiscal 2022 reflects analysts’ optimism in the company’s growth potential. In the past 30 days, the Zacks Consensus Estimate for fiscal 2022 loss has narrowed from $1.42 to 65 cents per share.

Growth Catalysts

In a bid to recover its business post the coronavirus-induced shutdowns, Dave & Buster's is focused on reopening stores in compliance with the state and local regulators. In order to support the re-openings, the company increased focus on marketing message and media execution. Notably, it is initiating a local approach to marketing that utilizes traditional and digital media to drive awareness and accelerate recovery. At the end of fourth-quarter fiscal 2020, the company had 107 properties under operation.



Additionally, the company believes that it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives as well as deployment of better technology. The company thus intends to leverage its growing loyalty database and continue to invest in other mobile applications to build customer connections and drive frequent customer visitation. During the fiscal fourth quarter, the company initiated a combination of a new service model, tablets and a mobile web platform to enable a completely contactless order-pay experience. Notably, the services have been implemented in its reopened New York stores.

The company also continues to focus on virtual kitchen concepts, optimizing back-of-the-house operations and enhancing bar menu to enable seamless flow of food as well as boost guest experience. Going forward, the company intends to roll-out high-speed ovens across stores that reduce cook time by more than 40%. Also, the company expects to increase its menu offerings to 28 by late May 2021.

Meanwhile, the company continues to evolve its amusement strategy on the back of new and riveting content, including games based on some of the world’s finest movie properties. In this regard, Dave & Buster’s continues to collaborate with various game manufacturing partners and remains steadfast on its strategy of including proprietary content exclusive to the company forever. Going forward, the company plans to launch new games such as Minecraft Dungeons Arcade, Hat Trick Hero and Hungry Hungry Hippos. It also has Top 1 VR arcade in the pipeline.

Moreover, the company intends to explore sports betting partnership to bring sports racing and daily fantasy sports to Dave & Buster's stores, subject to regulatory permissions. With negotiations underway, details are likely to be concluded over the upcoming periods. Also, it is working on entertainment programming function focused on creating compelling content-based events to drive broader reach and boost visit frequency. With the help of a centralized programming team, the company intends to boost the live sports experience in lieu of becoming a premier-sports watching destination.

Zacks Rank & Other Key Picks

Dave & Buster’s currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the same space include Darden Restaurants, Inc. DRI, Chuy's Holdings, Inc. CHUY and Starbucks Corporation SBUX. Darden sports a Zacks Rank #1, while Chuy's Holdings and Starbucks carry a Zacks Rank #2.

Darden 2021 earnings are expected to rise 26.5%.

Chuy's Holdings has a trailing four-quarter earnings surprise of 126.5%, on average.

Starbucks has three-five-year earnings per share growth rate of 12%.

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Starbucks Corporation (SBUX) : Free Stock Analysis Report

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