Dave & Buster's Entertainment (PLAY) stock is struggling for direction Wednesday after the entertainment and restaurant chain reported its second-quarter earnings results.
In the 13 weeks ended August 6, Dave & Buster's revenue increased 2.8% year-over-year to $557.1 million, helped by the addition of 13 net new stores. While its comparable-store sales decreased 6.3%, earnings per share (EPS) were up 19.1% from the year-ago period to $1.12.
"We are pleased with the progress we are making on our strategic initiatives and on the strong financial results achieved during the quarter," said Dave & Buster's CEO Chris Morris in a statement. "During the quarter, we grew revenue and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization], expanded our adjusted EBITDA margins and generated strong operating cash flow which allowed us to invest in the business and return cash to shareholders."
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The results were mixed compared with what analysts expected. Wall Street was anticipating revenue of $560.6 million and earnings of 86 cents per share, according to MarketWatch.
"While we are disappointed with our same-store sales performance during the quarter in this complex and challenging environment, we are laser focused on our medium-term goals and encouraged by the progress we are making on each of the initiatives," Morris said. "We fully expect the impact of our initiatives to lead to growth in same-store sales, revenue, EBITDA and cash flow in the coming quarters."
Is PLAY stock a buy, sell or hold?
Dave & Buster's shares are down more than 45% for the year to date, but Wall Street is bullish on the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for PLAY stock is $52.71, representing implied upside of nearly 80% to current levels. Additionally, the consensus recommendation is Buy.
Speaking for the bulls is financial services firm Jefferies, which has a Buy rating and $60 price target on PLAY stock.
The company is well-positioned to capture share from other entertainment concepts, says Jefferies analyst Andy Barish. The analyst also likes Dave & Buster's strong development opportunity and store economics.
Barish adds that PLAY's long-term operating efficiency potential is underappreciated and its stock is undervalued and trades at a discount to full-service peers.
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