DexCom earnings beat by $0.03, revenue topped estimates
On Tuesday, Raymond (NSE:RYMD) James analyst Brian Vaccaro maintained a Market Perform rating on Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), following the company's fourth-quarter results which fell short of expectations. The analyst pointed out that comparable store sales decreased by 9.4%, compared to the firm's estimate of a 7.5% decline. However, he noted that improved store margins of 28.9%, versus Raymond James' estimate of 27.5%, helped offset the impact of the sales decline due to further labor cost reductions.
Vaccaro highlighted that management has observed a recent improvement in comparable store sales after a weak February, aligning with broader segment trends. The company is also in the process of correcting past errors as it looks for a new CEO. Despite these developments, the analyst expressed concerns regarding the sustainability of cost cuts and their potential effect on customer experience. Additionally, there is uncertainty around the company's remodel program, which was once considered a key driver for comparable store sales growth.
The analyst also mentioned external factors such as tariff uncertainty, which could negatively influence consumer demand and increase the cost of goods sold for amusements—a figure that is currently at a record low as a percentage of sales. Another point of concern is Dave & Buster's leveraged balance sheet, with debt to EBITDA exceeding 3 times.
Despite the low visibility on the company's future performance, Vaccaro suggested that the stock's current undervalued state might already reflect these challenges. He speculated that the company's reduced capital expenditures and higher free cash flow projections might offer some downside protection for the stock. Trading at a P/E ratio of 7.71, InvestingPro analysis suggests the stock is currently undervalued, with 13 additional exclusive ProTips available to subscribers, offering deeper insights into the company's financial health and growth prospects.
In other recent news, Dave & Buster's Entertainment reported its fourth-quarter fiscal 2024 earnings, which showed a slight miss on both earnings per share (EPS) and revenue expectations. The company announced an adjusted EPS of $0.69, falling short of the projected $0.72, while revenue was reported at $534.5 million, below the anticipated $549.05 million. Despite these misses, the company remains optimistic about its strategic initiatives, including the launch of new games and the reopening of its first international franchise in India. Additionally, Dave & Buster's plans to cap fiscal 2025 capital expenditures at $220 million and anticipates opening 10-12 new stores. In terms of analyst actions, no specific upgrades or downgrades were mentioned, but the company is actively searching for a new CEO, which could influence future evaluations. The company also highlighted its focus on optimizing its remodel program to achieve better returns. These developments indicate a period of transition and strategic realignment for Dave & Buster's as it works to improve its financial performance and market position.
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