Dave & Buster's Stock Jumps On Q2 Earnings: 3 Analysts React To Surprisingly Strong Sales Momentum

Dave & Buster's Entertainment Inc (NYSE: PLAY) shares traded higher Friday after the company reported better-than-expected second-quarter earnings and management struck a confident tone on the earnings call.

Dave & Buster’s reported adjusted second-quarter EPS of $1.07 on revenue of $377.6 million. Both numbers topped consensus analyst estimates of 58 cents and $358.5 million. Revenue was up 642.9% from a year ago.

Same-store sales in the quarter were up 3.6% from pre-pandemic levels in 2019. Dave & Busters reported $121 million in operating cash flow in the quarter.

CEO Brian Jenkins said the company’s second-quarter numbers are “clear evidence that the brand is back.”

Dave & Busters said same-store sales so far in the third quarter, including the recent Labor Day Weekend, are up 1.9% compared to 2019.

Looking ahead, the company said third-quarter EBITDA will be “significantly higher” than the $39.8 million in EBITDA it reported in the third quarter of 2019. The company also said it expects two-year same-store sales growth to remain at around the 1.9% level throughout the remainder of the quarter.

Related Link: Lululemon Analysts Break Down Q2 Earnings: 'Clear Runway For Continued Growth'

Voices From The Street: Raymond James analyst Brian Vaccaro said Dave & Buster’s shares are attractively valued and the company’s third-quarter guidance seems conservative.

“In all, we continue to view PLAY shares as materially undervalued (2022 EV/EBITDA < 6x) with a very positive risk/reward from current levels,” Vaccaro wrote.

BMO Capital Markets analyst Andrew Strelzik said a positive inflection in sales coupled with margin leverage is a recipe for more upside ahead for Dave & Buster’s.

“Margin leverage was particularly impressive, including strong labor and food cost management in a challenging industry-wide operating cost environment,” Strelzik wrote.

Wells Fargo analyst Jon Tower said quarter-to-date same-store growth numbers suggest sales trends have softened heading into the second half of the year.

“We expect shares to rally on these results, but the call did little to assuage our LT concerns around both traditional & non-traditional competitive intrusion for the brand,” Tower wrote.

Dave & Buster's Ratings, Price Targets:

• Raymond James has a Strong Buy rating and $55 target.
• BMO Capital Markets has an Outperform rating and raised the price target from $54 to $58. 
• Wells Fargo has an Underweight rating and raised the price target from $38 to $40.