Dave & Buster’s Entertainment
jumped Wednesday after the entertainment and dining venue operator posted quarterly earnings that topped Wall Street expectations, overshadowing lagging trends in the company’s special events segment.
Dave & Buster’s reported third-quarter adjusted earnings of 21 cents a share, above estimates of 13 cents. Revenue in the quarter was $318 million, below analysts’ forecasts of $319.7 million but up 6.2% from $299.4 million in 2019.
Excluding seven stores located in states with vaccine mandates, comparable or same-store sales increased 1.1% vs. 2019. They decreased 0.4% compared with 2019 when including all stores.
The stock was rising 8.16% to $35.82 on Wednesday.
Walk-in comparable-store sales increased 6% in the third quarter while special event comparable-store sales declined 64% vs. the same period in 2019, the company said in a press release.
Dave & Buster’s said its business recovery has strengthened through the first five weeks of the fourth quarter, during which comparable-store sales rose 3.5% compared with the same period in 2019. Walk-in comparable store sales increased 14%.
However, special event comparable-store sales in the fourth quarter, the company said, have declined 59% compared to 2019.
Dave & Buster’s noted that fourth-quarter revenue will be “negatively impacted by both a lagging special events business relative to 2019, which typically carries a much higher penetration in the fourth quarter due to holiday parties, and from a calendar shift in its key holiday periods.”
Analysts reiterated their ratings on the stock. Raymond James maintained its rating of Strong Buy with a $55 price target.
“Sales are trending slightly above ‘19 levels (stronger walk-in partially offset by weaker special events), while profitability continues to significantly exceed management’s post-Covid recovery targets,” said Raymond James analyst Brian Vaccaro.
Bottom line, “we believe PLAY shares are materially undervalued at an EV/EBITDA in the mid-5’s,” Vaccaro said.
William Blair lowered its full-year 2021 revenue expectations to $1.32 billion from $1.33 billion. The firm dropped its revenue forecast for 2022 to $1.56 billion from $1.58 billion previously. The analysts reiterated their Outperform rating on the stock.
The board of Dave & Buster’s also approved a new share repurchase program of $100 million. The company suspended the program in 2020 during the pandemic.
Write to Karishma Vanjani at [email protected]