Analyst Shaves $12 off the Dave & Busters Entertainment (PLAY) Price Target; Here’s Why

Dave & Buster’s Entertainment Inc (NASDAQ:PLAY) shares are tumbling nearly 4% in Wednesday’s trading session, after the restaurant and entertainment chain released mixed fourth-quarter earnings results.

Specifically, PLAY reported Q4 adjusted EPS of $0.61, above the Street at $0.60, while revenue of $304.9 million was essentially in line with the Street. Blended comps have declined since the ICR update, ending the quarter down -5.9%, below the Street of -5.0%. Both amusement and food and beverage comps declined, down -4.2% and -7.8%, respectively. Management continued to attribute the comp weakness to: (1) game content; (2) competitive intrusion and; (3) adverse weather. During the quarter, PLAY’s restaurant-level margin declined by 20 bps to 30.9% (60 bps above our estimate).

In reaction, Maxim analyst Stephen Anderson lowered his price target on PLAY from $74 to $62, while reiterating a Buy rating on the stock. (To watch Anderson’s track record, click here)

Anderson commented, “We lower our price target to $62, from $74, based on short-term sales volatility and the likelihood of accelerated investment to boost sales. Our new $62 price target reflects a continued shift in favor of high-margin amusements as a percentage of total sales, and although we believe FY18 will be an investment year for PLAY, we expect the investments to result in sustained top-line and bottom-line growth in FY19 and beyond. Moreover, PLAY maintains strongly favorable attributes, such as a robust unit pipeline and a continuing shift in favor of high-margin amusements. Amid concerns about rising menu prices and the rise in delivery services resulting in declining restaurant traffic, we view PLAY’s positioning as a dining-and-entertainment destination as a key positive.”

PLAY has one of the best ratings by the Street. TipRanks reveals that the stock has a Strong Buy analyst consensus rating with 7 back-to-back buy ratings in the last three months. Meanwhile the average analyst price target of $57.71 suggests the stock has upside potential of just over 47% from the current share price for the next 12 months.

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