Tuesday, Truist Securities revised its price target for Dave & Buster's (NASDAQ:PLAY) shares, lowering it to $56 from the previous $59, while still maintaining a Buy rating on the stock. The adjustment comes ahead of the company's third quarter 2024 results, which are anticipated to reveal a slight shortfall in same-store sales (SSS). Despite this, the firm remains optimistic about the entertainment and dining chain's future performance.
The analyst at Truist Securities has forecasted a 6.5% decline in third quarter SSS, which is slightly worse than the consensus estimate of a 5.5% drop. This expected miss is considered to have been already factored into the market's expectations. Moreover, the analyst points out that the sector as a whole has seen a deceleration in SSS during the third quarter, indicating that Dave & Buster's is not the only company facing challenges.
Despite the anticipated dip in third quarter sales, Truist Securities believes that the fourth quarter holds promise for Dave & Buster's due to several sales catalysts. These include store remodels, special events, and marketing initiatives that are expected to drive sales growth. The firm's assessment is based on data and discussions with investors who are focused on data analytics, suggesting there could be an upside surprise in high-single-digit growth expectations.
The lack of a sales rebound in the third quarter is seen as a disappointment, but the analyst remains confident in the company's turnaround strategies. These strategies are expected to start showing results in the fourth quarter of 2024. Despite the lowered estimates and price target, Truist Securities' new target still implies a significant potential upside for Dave & Buster's stock.
In other recent news, Dave & Buster's Entertainment, Inc. reported a surge in revenue to $557 million in the second quarter of 2024, with adjusted EBITDA reaching $152 million. This growth is attributed to strategic initiatives like remodeling, a revamped food and beverage menu, and bolstered marketing efforts. Despite facing macroeconomic challenges, the company remains optimistic about future growth, driven by ongoing initiatives and a focus on guest satisfaction.
Benchmark initiated coverage on Dave & Buster's shares with a Hold rating, citing current economic conditions that could dampen the impact of the company's growth initiatives. However, the firm remains positive on the company's prospects. Meanwhile, BMO Capital Markets adjusted its outlook on Dave & Buster's, reducing the price target from $55 to $51, but maintains an Outperform rating on the stock.
The company is also expanding its footprint with new locations in Florida and New York and has completed 18 remodels, with a total of 44 expected by the end of the fiscal year. A new food and beverage menu was launched, and marketing efforts have grown the loyalty program to nearly 7 million members.
InvestingPro Insights
Recent InvestingPro data provides additional context to Truist Securities' analysis of Dave & Buster's (NASDAQ:PLAY). The company's market capitalization stands at $1.43 billion, with a P/E ratio of 13.33, suggesting a relatively modest valuation compared to some peers in the entertainment and dining sector.
InvestingPro Tips highlight that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future prospects, aligning with Truist's optimistic outlook for Q4 2024. However, it's noted that the stock has taken a significant hit over the last six months, with InvestingPro data showing a 27.12% price decline in that period. This downturn may reflect the challenges mentioned in the article, including the anticipated SSS decline in Q3.
Despite these headwinds, analysts predict the company will be profitable this year, which supports Truist's maintained Buy rating. For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Dave & Buster's, providing a deeper dive into the company's financial health and market position.
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