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Wall Street Sours On Dave & Buster's

Brett Hershman

Dave & Buster’s Entertainment Inc (NASDAQ:PLAY) shares were pummeled after reporting worse-than-expected first-quarter sales results on Tuesday that also saw the company cut its fiscal year 2019 guidance.

Wells Fargo Downgrades

Wells Fargo analyst Jon Tower lowered his rating from Outperform to Market Perform after earnings, saying his confidence is lowered in the company’s ability to sustainably drive same store sales growth without additional margin erosion.

“Further, while we believe the company’s strategy to drive new store growth vs. focusing the majority of its energy on same store sales growth is ultimately the proper business decision, we believe that public equity investors will continue to not recognize this value driver without the two engines firing simultaneously,” said Tower.

Tower lowered his price target from $65 to $48.

BMO Stays The Course

BMO analyst Andrew Strelzik said in a new analyst note that while he recognizes the stock is unlikely to gain traction in the near term, he is maintaining an Outperform rating "as new guidance appears achievable." The analyst did lower his price target from $66 to $55.

Strelzik said while first-quarter performance was limited by weather and calendar shifts and there is a lack of visibility into comp outlook for the remainder of the year, the launch of Dave & Buster’s upcoming mobile app represents a potential long-term opportunity to leverage scale and resource advantages over competitors and could increase visit frequency over time.

SunTrust Says Competition Is Weighing On Same-Store Sales

SunTrust analyst Jake Bartlett dropped his rating from a Buy to a Hold and lowered his price target from $64 to $47.

Bartlett says the sharp deceleration in same store sales in the second half of the first quarter, a slow start to the second quarter and increasingly difficult compares shakes his confidence the company will generate positive same store sales in 2019.

View more earnings on PLAY

“While the timing of Easter may have had some impact, we believe that the largest impact was competitive intrusion. The SSS deceleration in April and May is particularly disappointing in light of the late March and mid-May launch of PLAY’s new ‘Star Trek’ and ‘Men in Black’ VR attractions,” said Bartlett.

The analyst said competitive headwinds appear too stiff to overcome and now expects negative same-store sales in 2019.

Dave & Buster's shares fell more than 20% in Wednesday's session. The stock traded around $40.58 per share at time of publication Thursday afternoon.

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Benzinga's Top Upgrades, Downgrades For June 12, 2019

Latest Ratings for PLAY

Date Firm Action From To
Jun 2019 Downgrades Buy Hold
Jun 2019 Downgrades Outperform Market Perform
Jun 2019 Downgrades Buy Hold

View More Analyst Ratings for PLAY
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