Bear of the Day: Dave & Buster’s (PLAY)
Dave & Buster’s (PLAY) has been consistently in the cellar of the Zacks Rank for years now.
I recall writing about it in 2024 when the stock was in the $60s and $50s.
My colleague Shaun Pruitt took up the task in October when shares were around $18.
Here’s what he wrote on October 6…
Despite rumors, Dave & Buster’s is not closing down and is actually expanding with new locations under construction and strategic growth plans in place.
However, this transition has taken a toll on investor sentiment as Dave & Buster’s has had a slow recovery from pandemic-related struggles and a more inflation-conscious consumer. Trying to navigate a challenging operating environment, Dave & Buster’s stock has drifted toward new multi-year lows at under $20 a share.
Profitability Collapse & Cautious Outlook
Coming off a disappointing Q2 report, the decline in Dave & Buster’s profitability is more concerning due to a cautious outlook from its new CEO, Tarun Lal, who took over in May of 2024. Acknowledging strategic missteps and operational inefficiencies, Lal’s remarks have suggested a long road to recovery, which has further weighed on investor confidence.
This comes as Dave & Buster’s reported Q2 EPS of $0.40 last month, which plummeted from $1.12 per share in the comparative quarter and missed expectations of $0.88 by a grizzly 54%. Furthermore, Dave & Buster’s has missed EPS expectations in three of its last four quarterly reports with an average earnings surprise of -18.68%.
Highlighting Dave & Buster’s profitability collapse, Q2 net income was down 67% to $11.4 million versus $40.3 million a year ago. Dave & Buster’s EBITDA margins dropped to 23.3% from 27.2% in Q2 2024, attributed to rising operating costs and stagnant revenue.
(end of Shaun Pruitt article excerpts)
Two Quarters Later, the Decline is Worse
On March 31, PLAY delivered their Q4 FY’26 report with these highlights…
>>PLAY reported a Q4 loss of 35 cents per share, missing estimates and down from 66 cents EPS a year ago.
>>Revenues fell 0.9% to $529.6M as entertainment sales dropped 6.6% on weaker gaming demand.
>>Comparable sales declined 3.3%, while higher costs and weather disruptions pressured margins.
You can read more in this report: Dave & Buster’s Q4 Earnings & Revenues Miss Estimates, Down Y/Y
Subsequent to these data points and management commentary, analysts slashed their full year FY’27 estimates (began February), driving the Zacks EPS Consensus from a profit of 47-cents to a LOSS of 80-cents — representing an annual decline of 167%.
Next year’s forecasts were also flipped from profit to loss.
Bottom line: PLAY might be a fun place to take the family or watch a ball game with friends, but there’s no joy for your money here. The Zacks Rank will let you know when it’s play time again.
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Dave & Buster’s Entertainment, Inc. (PLAY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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