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Dave & Buster's Stock's Earnings Estimates Going Down: Hold or Fold?
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The Zacks Consensus Estimate for Dave & Buster's Entertainment, Inc.’s (PLAY - Free Report) 2024 and 2025 earnings per share (EPS) has dropped by 10.9% and 16.7%, respectively, in the past 60 days. The downward revision in earnings estimates indicates analysts’ decreasing confidence in the stock.
The company has also missed the Zacks Earnings Estimates in the trailing two quarters.
Shares of Dave & Buster's have declined 12.7% in the past three months against the Zacks Retail - Restaurants industry's 13.4% growth. The company’s share price performance also lagged industry players like Starbucks Corporation (SBUX - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) and Yum! Brands, Inc. (YUM - Free Report) .
PLAY’s Price Performance
Image Source: Zacks Investment Research
Factors Acting as Headwinds for PLAY Stock
The tough economic conditions have made it difficult for the company to keep steady foot traffic and sales at its locations. In the second quarter of fiscal 2024, comparable store sales (including Main Event stores) dropped 6.3% from last year. This was mainly due to fewer walk-in customers compared to a stronger consumer environment a year ago. The company expects sales in 2024 to be affected by the timing of spring breaks.
Dave & Buster’s is heavily investing in remodeling its stores, aiming to complete 44 by the end of fiscal 2024. While these remodels have helped boost revenue, it's uncertain if this strategy is sustainable long-term. The cost of these remodels could strain the company’s finances, especially if economic challenges continue. Without solid same-store sales growth, the return on these investments may not be worth the expense.
The company has improved its pricing strategies and food and beverage offerings. However, its ongoing testing of price adjustments and focus on premium drinks might push away cost-conscious customers. In a period of tight discretionary spending, raising prices on games and food could hurt guest traffic.
PLAY’s Valuation and Market Signals
On the bright side, PLAY stock is trading at a forward 12-month price-to-sales ratio of just 0.57X, which is far below the industry average of 3.95X. That could make the stock look like a bargain to some.
Image Source: Zacks Investment Research
However, technical indicators are negative for PLAY's performance. The stock is trading below its 200-day moving average, signaling a bearish trend.
PLAY Shares Trade Below 200-Day SMA
Image Source: Zacks Investment Research
Our Take
The outlook for Dave & Buster's appears concerning, with declining earnings estimates and underperformance relative to industry peers. The company's heavy investments in remodeling, combined with weak same-store sales and rising costs, could further strain its financial health. Additionally, pricing strategies that risk alienating cost-conscious consumers in a tough economic environment may lead to further pressure on guest traffic. With technical indicators pointing to a bearish trend, it will be better for investors to stay away from this Zacks Rank #5 (Strong Sell) stock for the time being.
Image: Shutterstock
Dave & Buster's Stock's Earnings Estimates Going Down: Hold or Fold?
The Zacks Consensus Estimate for Dave & Buster's Entertainment, Inc.’s (PLAY - Free Report) 2024 and 2025 earnings per share (EPS) has dropped by 10.9% and 16.7%, respectively, in the past 60 days. The downward revision in earnings estimates indicates analysts’ decreasing confidence in the stock.
The company has also missed the Zacks Earnings Estimates in the trailing two quarters.
Shares of Dave & Buster's have declined 12.7% in the past three months against the Zacks Retail - Restaurants industry's 13.4% growth. The company’s share price performance also lagged industry players like Starbucks Corporation (SBUX - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) and Yum! Brands, Inc. (YUM - Free Report) .
PLAY’s Price Performance
Image Source: Zacks Investment Research
Factors Acting as Headwinds for PLAY Stock
The tough economic conditions have made it difficult for the company to keep steady foot traffic and sales at its locations. In the second quarter of fiscal 2024, comparable store sales (including Main Event stores) dropped 6.3% from last year. This was mainly due to fewer walk-in customers compared to a stronger consumer environment a year ago. The company expects sales in 2024 to be affected by the timing of spring breaks.
Dave & Buster’s is heavily investing in remodeling its stores, aiming to complete 44 by the end of fiscal 2024. While these remodels have helped boost revenue, it's uncertain if this strategy is sustainable long-term. The cost of these remodels could strain the company’s finances, especially if economic challenges continue. Without solid same-store sales growth, the return on these investments may not be worth the expense.
The company has improved its pricing strategies and food and beverage offerings. However, its ongoing testing of price adjustments and focus on premium drinks might push away cost-conscious customers. In a period of tight discretionary spending, raising prices on games and food could hurt guest traffic.
PLAY’s Valuation and Market Signals
On the bright side, PLAY stock is trading at a forward 12-month price-to-sales ratio of just 0.57X, which is far below the industry average of 3.95X. That could make the stock look like a bargain to some.
Image Source: Zacks Investment Research
However, technical indicators are negative for PLAY's performance. The stock is trading below its 200-day moving average, signaling a bearish trend.
PLAY Shares Trade Below 200-Day SMA
Image Source: Zacks Investment Research
Our Take
The outlook for Dave & Buster's appears concerning, with declining earnings estimates and underperformance relative to industry peers. The company's heavy investments in remodeling, combined with weak same-store sales and rising costs, could further strain its financial health. Additionally, pricing strategies that risk alienating cost-conscious consumers in a tough economic environment may lead to further pressure on guest traffic. With technical indicators pointing to a bearish trend, it will be better for investors to stay away from this Zacks Rank #5 (Strong Sell) stock for the time being.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.