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Bear of the Day: Dave & Buster's Entertainment (PLAY)
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While Dave & Buster's Entertainment Inc.(PLAY - Free Report) offers some potential for long-term growth, investors seeking near-term stability may want to exercise caution and consider other investment options.
Despite the company's well-known brand and extensive network of entertainment venues, recent financial trends suggest that there are likely better opportunities out there in the market today.
With a large Q1 earnings miss that included falling comparable sales and rising labor costs, the stock experienced a concerning plummet in earnings revisions. Dave & Buster's now has the lowest Zacks Rank.
PLAY's Gruesome Earnings Downgrades
With the recent challenges such as rising labor costs cutting into net margins, analysts have lowered their earnings estimates going forward, giving Dave and Buster’s Entertainment a Zacks Rank #5 (Strong Sell) rating.
In fact, analysts have unanimously lowered earnings forecasts across future timeframes. FY24 earnings estimates have declined by 19.5%, while FY25 earnings estimates have fallen by nearly 15%.
Image Source: Zacks Investment Research
PLAY Stock's Relative Underperformance
Especially concerning is the poor YTD performance in PLAY stock. In what has been a fantastic year for the stock market thus far, Dave and Buster’s Entertainment has been left behind.
Even when compared to the broader restaurant industry, which has not fared well this year, Dave and Busters is showing clear disinterest from investors.
Image Source: Zacks Investment Research
PLAY's Valuation in line with Historical Average
As of today, Dave and Buster’s Entertainment has a forward earnings multiple of 13x, which is significantly below the industry average, and in line with its 10-year median of 12.9x.
This is a welcome development for the stock, because if it had a valuation that was above its historical median, it could leave the stock vulnerable to further downside.
Image Source: Zacks Investment Research
Final Thoughts
Because of its Zacks Rank #5 (Strong Sell) rating, poor recent earnings results and downward momentum, I believe that PLAY stock is best to avoid for now.
However, it isn’t all terrible news. Earnings this year are expected to grow 9% YoY, and next year they are projected to pick up pace with estimates at 27% YoY growth.
Additionally, with the now fair valuation based on forward earnings multiples, Dave and Buster’s could be in a worse situation.
That being said, until the earnings revision trend can turn higher and the uncertainty around falling comp sales and rising labor costs can subside, investors would likely be better served by other investments.
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Bear of the Day: Dave & Buster's Entertainment (PLAY)
While Dave & Buster's Entertainment Inc. (PLAY - Free Report) offers some potential for long-term growth, investors seeking near-term stability may want to exercise caution and consider other investment options.
Despite the company's well-known brand and extensive network of entertainment venues, recent financial trends suggest that there are likely better opportunities out there in the market today.
With a large Q1 earnings miss that included falling comparable sales and rising labor costs, the stock experienced a concerning plummet in earnings revisions. Dave & Buster's now has the lowest Zacks Rank.
PLAY's Gruesome Earnings Downgrades
With the recent challenges such as rising labor costs cutting into net margins, analysts have lowered their earnings estimates going forward, giving Dave and Buster’s Entertainment a Zacks Rank #5 (Strong Sell) rating.
In fact, analysts have unanimously lowered earnings forecasts across future timeframes. FY24 earnings estimates have declined by 19.5%, while FY25 earnings estimates have fallen by nearly 15%.
Image Source: Zacks Investment Research
PLAY Stock's Relative Underperformance
Especially concerning is the poor YTD performance in PLAY stock. In what has been a fantastic year for the stock market thus far, Dave and Buster’s Entertainment has been left behind.
Even when compared to the broader restaurant industry, which has not fared well this year, Dave and Busters is showing clear disinterest from investors.
Image Source: Zacks Investment Research
PLAY's Valuation in line with Historical Average
As of today, Dave and Buster’s Entertainment has a forward earnings multiple of 13x, which is significantly below the industry average, and in line with its 10-year median of 12.9x.
This is a welcome development for the stock, because if it had a valuation that was above its historical median, it could leave the stock vulnerable to further downside.
Image Source: Zacks Investment Research
Final Thoughts
Because of its Zacks Rank #5 (Strong Sell) rating, poor recent earnings results and downward momentum, I believe that PLAY stock is best to avoid for now.
However, it isn’t all terrible news. Earnings this year are expected to grow 9% YoY, and next year they are projected to pick up pace with estimates at 27% YoY growth.
Additionally, with the now fair valuation based on forward earnings multiples, Dave and Buster’s could be in a worse situation.
That being said, until the earnings revision trend can turn higher and the uncertainty around falling comp sales and rising labor costs can subside, investors would likely be better served by other investments.