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On Wednesday, Raymond James maintained a Market Perform rating on Dave & Buster's Entertainment Inc. (NASDAQ:PLAY), with expectations set lower for the company's second quarter and future years. The firm adjusted its F2Q blended comparable sales (comps) forecast to a 5% decline, a steeper drop than the previously predicted 2.5% decrease. This revision aligns with reported softness in June and July across the restaurant and entertainment sectors.
The anticipated release of Dave & Buster's F2Q results, which concluded on August 6, is set for the morning of September 10. Analysts from Raymond James cite ongoing negative year-over-year comps as a concern, marking this as the sixth consecutive quarter of such trends. Additionally, comparisons with 2019 figures are nearing flat levels, suggesting a challenging landscape for the company.
Dave & Buster's shares have seen a significant downturn, falling over 50% from their peak in April. Despite new initiatives in menu, marketing, and operations, there hasn't been a notable impact on revitalizing comps amid a slowdown in consumer spending. The second half of the year is also expected to be challenging, with comparable sales anticipated to drop by 3% year-over-year, contrasting with a consensus of a slight decrease.
The company's valuation has suffered due to these performance issues, but it may offer some downside protection. However, the combination of low visibility on comparable sales and a leveraged balance sheet—with mid-2s debt to EBITDA ratio and significant capital expenditures on unit growth and remodels—has led analysts to adopt a cautious stance. They await a clearer indication of improving comps, which may potentially emerge in 2025 as the percentage of remodeled units reaches a significant level.
In other recent news, Dave & Buster's Entertainment Inc faced a challenging Q1 in the fiscal year 2024, with earnings per share of $0.99 and revenue of $588 million, falling short of analyst expectations. Truist Securities, Loop Capital, and BMO Capital Markets responded by reducing their price targets for the company. Despite these adjustments, Truist Securities and Loop Capital maintained a Buy rating, while UBS kept a Neutral stance.
In addition to these financial updates, Dave & Buster's recently announced the expansion of seven new international franchise units and future store openings, aiming for an adjusted EBITDA of over $1 billion. This development followed the Main Event merger, which resulted in $25 million in cost savings, with an additional $40-60 million expected.
Dave & Buster's shareholders also ratified the appointment of KPMG LLP as the company's Independent Registered Public Accounting Firm for the fiscal year 2023 and approved the company's executive compensation plan.
InvestingPro Insights
As Dave & Buster's Entertainment Inc. (NASDAQ:PLAY) braces for its upcoming second-quarter results, InvestingPro data and tips provide a deeper look into the company's financial health and market performance. With a market capitalization of $1.2 billion and a P/E ratio that has adjusted to 10.1 in the last twelve months as of Q1 2025, the company is trading at a high Price / Book multiple of 4.12, reflecting investor assessments of its assets and potential profitability.
Revenue growth has shown a modest increase of 4.05% over the last twelve months, signaling some resilience in earnings despite market challenges. However, the company's stock price has experienced significant volatility, with a 50.33% decline over the last six months, emphasizing the cautious approach suggested by analysts. InvestingPro Tips further highlight the company's debt burden and the fact that short-term obligations exceed its liquid assets, a situation that demands careful monitoring by investors.
With the stock trading near its 52-week low and a price that has fallen significantly over the last three months, some may see a potential buying opportunity, especially as analysts predict the company will be profitable this year. It's noteworthy that management has been aggressively buying back shares, which could indicate confidence in the company's future. For investors looking for more detailed analysis, InvestingPro offers additional tips to help navigate the investment landscape surrounding Dave & Buster's.
For those interested in exploring further, there are 11 additional InvestingPro Tips available, which can provide more nuanced guidance on the company's prospects. Visit InvestingPro for a comprehensive analysis: https://www.investing.com/pro/PLAY
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