Keep an eye on Dave & Buster’s (NASDAQ:PLAY) stock. Since bottoming out around $32.57 in January, PLAY stock shot to a high of $52.54. It’s now pulling back on an earnings’ miss, and on a broad market pullback. But don’t write Dave & Buster’s stock off just yet.
For one, earnings weren’t so bad. Two, analysts are raising their price targets. Three, the company is paying $835 million to buy entertainment company, Main Event.
Let’s start with earnings. For Q4 2022, the company posted earnings-per-share of 52 cents a share, which was a strong reversal from a year-earlier loss of $1.19. However, it was still below expectations for 61 cents. Revenue jumped to $343.1 million from $116.8 million, but also missed expectations for $363.8 million. Still, the numbers weren’t terrible.
In fact, PLAY may actually be a strong buying opportunity, once it bottoms out in this crazed market. Plus, analysts seem to love Dave & Buster’s stock.
Analysts at Truist for example are maintaining a buy rating on the stock, with a $60 price target. As noted by Barron’s contributor, Joe Woelfel, “Truist noted that the company’s store-level margins during the fourth quarter were stronger than expected, despite the revenue miss, ‘suggesting that cost savings found during Covid are sustainable and highlighting PLAY’s relatively low exposure to operating cost inflation.’”
Raymond James analyst Brian Vaccaro raised his price target on PLAY to $60 from $55, with a strong buy rating. Deutsche Bank analyst Brian Mullan raised the firm’s price target to $54 from $50, with a buy rating. Jefferies analyst Andy Barish raised his target to $60 from $56.
Dave & Buster’s also just announced it bought entertainment company, Main Event for $835 million in an all-cash deal. Also, according to Barron’s Lina Saigol, “Dave & Buster’s expects the acquisition to add to both earnings and growth, and achieve cost savings of $20 million within the first two years from consolidating store support centers and supply-chain efficiencies.”
Sure, shares of PLAY stock are getting clobbered with the broader market. However, I’d use weakness as a buy opportunity.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
