Dave & Buster’s Entertainment (PLAY) Stock Still Has Upside, Says Canaccord; Lifts Price Target to $65

Shares of dining and arcade chain Dave & Buster’s Entertainment (NASDAQ:PLAY)  jumped over 15% in Tuesday trading session. The reason, as you might have guessed, is earnings.

PLAY reported Q1 EPS of $1.04, above the Street estimates of $0.93, while revenue of $332.2 million came in above the Street at $321.6. Blended comps declined -4.9%, but were better than the Street at -5.7%.

In conjunction with the release, CEO Stephen King announced his retirement, but will remain on as chairman of the board. Brian Jenkins, current CFO, has been promoted to CEO. Joe DeProspero, VP of finance, will step in as interim CFO while a search for a permanent CFO is ongoing.

In reaction, Canaccord analyst Lynne Collier lifted his price target for PLAY stock from $60 to $65, while reiterating a Buy rating on the stock. (To watch Collier’s track record, click here)

Collier commented, “We are pleased that comps sequentially improved ahead of the VR launch and believe the quarter will mark the comp low point of the year. We also believe that our sensitivity analysis on VR will likely prove conservative. We now believe that our +0.8% to +2.0% comp lift range could be low given that 15 locations will receive two VR rides (vs. our assumption of one) and we expect the company will likely expand the numbers of hours that VR is available. We retain our BUY rating given the following: (1) our expectation of improving comps in 2H given the roll-out of Virtual Reality + easier comparisons; (2) new store performance continues strong with year 1 cash-on-cash returns of ~50%+; (3) double-digit annual unit growth slated over the next several years; (4) compelling valuation at ~8.5x NTM EBITDA pre-release, below the company’s historical average.”

As of this writing, all the 9 analysts polled by TipRanks, in the past 12 months, rate Dave & Busters Entertainment stock a Buy. With a return potential of 11%, the stock’s consensus target price stands at $61.11.


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