Entertainment and dining services provider Dave & Buster’s (NASDAQ:PLAY) stock soared more than 19% yesterday. The upside can be attributed to the company’s solid growth outlook for the medium term, provided at its Investor Day presentation.
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The highlight of the event was PLAY’s target to achieve an adjusted EBITDA between $635 million and $825 million over a three-year period. This target represents a significant increase compared to the company’s reported adjusted EBITDA of $527 million in 2022.
PLAY’s plan to boost its bottom line consists of making technological improvements and increasing marketing optimization. Additionally, PLAY plans on raising game prices, updating its food menu, and expanding its special events business.
Let’s take a closer look at how the company expects these initiatives to support growth.
Key Growth Drivers
Dave & Buster’s aims to enhance its media mix in order to effectively connect with its target market. Also, PLAY expects to improve its special event offerings to make the restaurant chain more attractive than its competitors. Furthermore, it sees strong potential in the sports viewing market and expects the upcoming key events to support an increase in traffic.
In regard to game pricing, PLAY aims to vary prices depending on the store location instead of its current strategy of charging the same price nationwide. The company has not increased prices for its power card in the last 20 years and thus sees significant opportunities for growth in this area.
Interestingly, Dave & Buster’s also aims to change the look of its stores and implement technology to improve customer satisfaction. Lastly, the company targets both international and domestic expansion. PLAY sees the potential to open more than 346 additional stores in the long term.
Regarding expenses, the company anticipates potential cost savings of up to $15 million by implementing technological advancements and reducing labor costs.
Is PLAY a Buy or Sell?
Yesterday, Gordon Haskett Capital analyst Jeff Farmer maintained a Buy rating on PLAY stock and raised the price target to $60 from $52.
Currently, Dave & Buster’s has a Strong Buy consensus rating based on seven Buys and two Holds. Dave & Buster’s average price target is $54.13, suggesting 17.4% upside potential from the current level. Year-to-date, PLAY stock has gained 29.9%.
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