Dave & Buster’s Jumps on Better-than-Expected Q2 Results

American dining and entertainment venue operator Dave & Buster’s Entertainment, Inc. (PLAY) reported better-than-expected second-quarter results, with Food and Beverage, Amusement, and other segments recording triple-digit year-over-year revenue growth. Shares jumped 6.5% on the news in the extended trading session on September 9.

The company reported earnings of $1.07 per share, meaningfully surpassing analysts’ estimates of $0.52 per share. In Q2 FY20, PLAY posted a loss of $1.24 per share. (See Dave & Buster’s Entertainment stock charts on TipRanks)

Revenue came in at $377.6 million, up a whopping 643% year-over-year, and outpaced the Street’s estimate of $351 million. During the quarter, all of PLAY’s 142 stores were operational, while in the year-ago period, most of the stores were closed due to the COVID-19 pandemic.

The company also launched a new menu in Q2, rolled out mobile web platforms and tablets, as well as executed a new marketing strategy.

Commenting on the results, Brian Jenkins, the company’s CEO, said, “Through continued execution of our strategic initiatives, including our new menu, optimized marketing, and technology investments, we are excited to move forward with a strong foundation to drive sustained profitable growth.”

In response to PLAY’s quarterly performance, Stifel Nicolaus analyst Christopher O`Cull maintained a Hold rating on the stock with a price target of $40, implying 12.9% upside potential to current levels.

O`Cull said, “The stock is likely range-bound as SRS gains slow and margin performance starts to normalize; we believe updated estimates will largely reflect the reopening opportunity. In our opinion, new investors will need to underwrite the company’s capital plan, which includes accelerating unit growth and reinvesting in existing restaurants (the last major remodel effort was about 5-7 years ago).”

The analyst’s cautious view is based on the uncertainty surrounding the COVID-19 pandemic. Despite a majority of people being vaccinated, COVID cases are on the rise, which he believes will lead to commensurate changes in consumer behavior, and operating restrictions hampering sales going forward.

Overall, the stock has a Moderate Buy consensus rating based on 4 Buys, 4 Holds, and 1 Sell. The average Dave & Buster’s Entertainment price target of $49.56 implies 39.8% upside potential to current levels. Shares have gained 96.7% over the past year.