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Here's Why Investors Should Retain Dave & Buster's (PLAY) Stock
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Dave & Buster's Entertainment, Inc. (PLAY - Free Report) is poised to benefit from its amusement business, robust comps growth and digital efforts. This and the focus on broadening entertainment offerings bode well. However, inflationary pressures are a concern.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's continues to focus on simplifying its store operations, improving the guest experience and enhancing its food and beverage and entertainment offerings to drive sales and profitability. It has also expanded its entertainment plans by operating programmed events in selected markets. During the fiscal third quarter, amusement and other revenues surged 50% year over year to $315.4 million. The upside was primarily driven by a reduction in discounting and a shift toward higher denomination Power Cards. Increased dependence on gaming has aided the company in countering the headwinds stemming from consumer discretionary spending.
Robust comps growth bodes well for the company. During the first five weeks of fourth-quarter fiscal 2022, the company’s comps rose 3.1% from 2021 levels and 9.2% from 2019 levels. During the five-week period, pro-forma combined walk-in comparable store sales fell 2.4% year over year but increased 15.7% from 2019 levels.
Dave & Buster's intends to broaden its entertainment offerings by including more immersive sports viewing experiences, adding fantasy sports and permitting in-sports betting options. The company plans to explore a sports betting partnership to bring sports racing and daily fantasy sports to Dave & Buster's stores, subject to regulatory permissions. It is also working on an entertainment programming function focused on creating compelling content-based events to drive reach and boost visit frequency. Thus, with the help of a centralized programming team, Dave & Buster's intends to enhance the live sports experience in lieu of becoming a premier sports-watching destination.
Dave & Buster's digital initiatives are likely to drive growth. The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and deploying better technology. The company intends to leverage its growing loyalty database and invest in other mobile applications to build customer connections and drive frequent customer visitation.
Image Source: Zacks Investment Research
In the past three months, shares of Dave & Buster's have gained 9.7% against the industry’s 1.6% fall.
Concerns
The company has been continuously shouldering increased expenses, which have been detrimental to margins. A challenging macro environment, including inflationary pressures on labor and commodities, continues to affect the company. The company anticipates the headwinds to persist over the next few quarters. The industry players expect to witness higher costs due to labor and supply-chain shortages for quite some time. At the end of third-quarter fiscal 2022, total operating expenses were $451.1 million, up from $293.5 million reported in the prior-year quarter. The company anticipates inflationary pressures to impact operations for some time.
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Brinker International, Inc. (EAT - Free Report) .
Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 29.2% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 11.6%. Shares of the company have increased 13.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 8.1% and 4.2%, respectively, from the year-ago period’s levels.
Brinker carries a Zacks Rank #2. EAT has a long-term earnings growth rate of 7.1%. The stock has gained 9.7% in the past year.
The Zacks Consensus Estimate for Brinker’s 2024 sales and EPS suggests growth of 3.9% and 36.5%, respectively, from the year-ago period’s reported levels.
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Here's Why Investors Should Retain Dave & Buster's (PLAY) Stock
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) is poised to benefit from its amusement business, robust comps growth and digital efforts. This and the focus on broadening entertainment offerings bode well. However, inflationary pressures are a concern.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Growth Catalysts
Dave & Buster's continues to focus on simplifying its store operations, improving the guest experience and enhancing its food and beverage and entertainment offerings to drive sales and profitability. It has also expanded its entertainment plans by operating programmed events in selected markets. During the fiscal third quarter, amusement and other revenues surged 50% year over year to $315.4 million. The upside was primarily driven by a reduction in discounting and a shift toward higher denomination Power Cards. Increased dependence on gaming has aided the company in countering the headwinds stemming from consumer discretionary spending.
Robust comps growth bodes well for the company. During the first five weeks of fourth-quarter fiscal 2022, the company’s comps rose 3.1% from 2021 levels and 9.2% from 2019 levels. During the five-week period, pro-forma combined walk-in comparable store sales fell 2.4% year over year but increased 15.7% from 2019 levels.
Dave & Buster's intends to broaden its entertainment offerings by including more immersive sports viewing experiences, adding fantasy sports and permitting in-sports betting options. The company plans to explore a sports betting partnership to bring sports racing and daily fantasy sports to Dave & Buster's stores, subject to regulatory permissions. It is also working on an entertainment programming function focused on creating compelling content-based events to drive reach and boost visit frequency. Thus, with the help of a centralized programming team, Dave & Buster's intends to enhance the live sports experience in lieu of becoming a premier sports-watching destination.
Dave & Buster's digital initiatives are likely to drive growth. The company believes it can drive traffic by enhancing in-store and out-of-store customer experience via digital and mobile strategic initiatives and deploying better technology. The company intends to leverage its growing loyalty database and invest in other mobile applications to build customer connections and drive frequent customer visitation.
Image Source: Zacks Investment Research
In the past three months, shares of Dave & Buster's have gained 9.7% against the industry’s 1.6% fall.
Concerns
The company has been continuously shouldering increased expenses, which have been detrimental to margins. A challenging macro environment, including inflationary pressures on labor and commodities, continues to affect the company. The company anticipates the headwinds to persist over the next few quarters. The industry players expect to witness higher costs due to labor and supply-chain shortages for quite some time. At the end of third-quarter fiscal 2022, total operating expenses were $451.1 million, up from $293.5 million reported in the prior-year quarter. The company anticipates inflationary pressures to impact operations for some time.
Zacks Rank & Key Picks
Dave & Buster's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Brinker International, Inc. (EAT - Free Report) .
Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 29.2% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 11.6%. Shares of the company have increased 13.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 8.1% and 4.2%, respectively, from the year-ago period’s levels.
Brinker carries a Zacks Rank #2. EAT has a long-term earnings growth rate of 7.1%. The stock has gained 9.7% in the past year.
The Zacks Consensus Estimate for Brinker’s 2024 sales and EPS suggests growth of 3.9% and 36.5%, respectively, from the year-ago period’s reported levels.