BMO Capital Markets has maintained its Outperform rating on Dave & Buster's Entertainment Inc. (NASDAQ: PLAY), with a steady price target of $55.00.
The firm highlighted the company's second-quarter fiscal year 2024 EBITDA, which surpassed consensus expectations by $11 million, reaching $152 million.
The performance was attributed to robust restaurant margins and reduced general and administrative expenses, which helped offset weaker comparable store sales.
The positive EBITDA result is seen as a rebound from previous quarters' disappointments, suggesting that Dave & Buster's is capable of overcoming top-line revenue challenges.
BMO Capital adjusted its forecasts due to anticipated softer sales but expressed confidence in the company's ability to navigate a difficult market.
Cost savings were recognized as a key factor that could bridge the gap to a more favorable sales environment, where Dave & Buster's strategic initiatives are expected to thrive.
Dave & Buster's stock is currently considered undervalued by BMO Capital, trading at approximately 4.5 times the firm's fiscal year 2025 EBITDA projections.
In other recent news, Dave & Buster's Entertainment reported an impressive second-quarter earnings beat. The company's adjusted earnings per share came in at $1.12, surpassing analyst estimates of $0.91.
However, the revenue of $557.1 million, while up 2.8% year-over-year, was slightly below the anticipated $567.33 million.
Despite a 6.3% decrease in comparable store sales from the same period last year, the company managed to expand its adjusted EBITDA margin to 27.2%, up from 25.9% a year ago. In addition, the firm opened two new locations and remodeled nine existing stores during the quarter, while also repurchasing $47.4 million worth of shares.
CEO Chris Morris expressed optimism about the impact of ongoing initiatives on future growth. The company ended the quarter with $13.1 million in cash and $481 million available under its revolving credit facility, with a net leverage ratio of 2.3x.
InvestingPro Insights
Recent data from InvestingPro underscores the current financial landscape for Dave & Buster's Entertainment Inc. (NASDAQ:PLAY). With a market capitalization of $1.18 billion and a P/E ratio standing at 12.63, the company showcases a valuation that reflects its earnings potential. Notably, the company's stock has been trading near its 52-week low, indicating a potential value opportunity for investors. Despite recent downward revisions in earnings by analysts for the upcoming period, Dave & Buster's has managed to maintain profitability over the last twelve months, as evidenced by a gross profit margin of 31.9%.
InvestingPro Tips highlight that while Dave & Buster's operates with a significant debt burden, management's aggressive share buyback strategy could signal confidence in the company's future. Additionally, the stock's volatility and the fact that short-term obligations exceed liquid assets are crucial considerations for investors. However, it's worth noting that analysts predict the company will be profitable this year, which could provide a positive outlook for the stock.
For a more comprehensive analysis and additional InvestingPro Tips, investors can visit https://www.investing.com/pro/PLAY, where 11 more tips are available to provide deeper insights into Dave & Buster's financial health and stock performance.
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