On Monday, UBS adjusted its financial outlook for entertainment and dining venue chain Dave & Buster's (NASDAQ:PLAY), reducing the price target to $56 from $66 while sustaining a Neutral rating on the stock. The adjustment comes ahead of the company's first-quarter earnings report, which is scheduled for release on June 12, 2024.
Dave & Buster's is anticipated to reveal persistently challenged sales trends, although cost savings are expected to bolster EBITDA. Investors are predicting a first-quarter same-store sales (sss) decline around mid-single digits, potentially falling short of the consensus estimate of a 2.8% decrease. Additionally, there is a range of adjusted EBITDA forecasts, many of which are below the consensus figure of $184 million, despite the company's history of surpassing EBITDA expectations.
The focus for investors will likely be on the latest sales trajectory and its implications for the second quarter. There is a heightened interest in a potential shift to positive same-store sales, considering the easing of past comparisons and the introduction of various initiatives. Updates on strategies to boost sales, including remodels, food and beverage improvements, and pricing adjustments, will be closely monitored.
UBS anticipates Dave & Buster's to reaffirm its 2024 development guidance, which includes the opening of 15 new venues across both brands and up to four international locations. The firm acknowledges the potential for upside in Dave & Buster's shares, citing the company's unique business model, attractive profit margins, and opportunities for EBITDA growth.
However, the balanced risk/reward perspective stems from ongoing sales pressures, a challenging macroeconomic environment, and limited visibility into future sales performance. The new price target of $56 is based on approximately 5.5 times the firm's reduced next twelve-month (NTM) EBITDA estimate, a decrease from the previous multiple of around 6 times.
In other recent news, Dave & Buster's Entertainment, Inc. has reported solid Q4 results and announced strategic corporate changes. The company's Q4 revenue reached $599 million, with an adjusted EBITDA of $152 million. In addition, Dave & Buster's has appointed Darin Harper as its new CFO, effective June 17, 2024, succeeding the retiring Michael Quartieri. Harper brings a wealth of experience from his previous roles, including CFO for Main Event Entertainment, Inc. and Group CFO for Ardent Leisure.
Analyst firms have also updated their outlook on Dave & Buster's. Piper Sandler has adjusted its stance on the company's stock to Neutral, citing limited upside potential, while Truist Securities maintains a bullish stance, raising its share price target and highlighting the company's strategic sales drivers.
These are recent developments for Dave & Buster's, which continues to focus on expansion and enhancing its position in the entertainment and dining market. The company plans to open 15 new stores in fiscal year 2024, remodel existing ones, and has increased its share repurchase authorization to $200 million.
InvestingPro Insights
As Dave & Buster's (NASDAQ:PLAY) approaches its first-quarter earnings report, InvestingPro data reveals a mixed financial landscape. The company's market capitalization stands at a robust $1.93 billion, with a Price/Earnings (P/E) Ratio of 16.52, indicating investor confidence in its earnings potential. However, when adjusted for the last twelve months as of Q4 2024, the P/E ratio contracts to 13.08, suggesting a more favorable valuation relative to its historical earnings.
From a growth perspective, Dave & Buster's has demonstrated a solid revenue increase of 12.26% over the last twelve months leading up to Q4 2024. This is complemented by a gross profit of $723.9 million, which translates to a healthy gross profit margin of 32.83%. Nevertheless, InvestingPro Tips highlight areas of concern: PLAY's stock price has experienced significant volatility, with a 22.45% drop over the last three months, and short term obligations currently exceed its liquid assets. Additionally, while analysts predict profitability this year, the company does not pay dividends, which may influence investor sentiment.
For investors seeking a comprehensive analysis, InvestingPro offers additional insights on Dave & Buster's, including 6 more InvestingPro Tips that could help inform investment decisions. To explore these in-depth, visit https://www.investing.com/pro/PLAY and consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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