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Dave & Buster’s Rebound Could Score for Investors 

Dave & Buster's stock

Key Points

  • Dave & Buster's has had a record-breaking quarter, and shares edge higher. 
  • A new repurchase plan is worth $100 million to investors. 
  • The company currently returns no dividend but could, now that business exceeds pre-pandemic levels. 
  • 5 stocks we like better than Dave & Buster's Entertainment.

Dave & Buster's Entertainment Inc. NASDAQ: PLAY has been working hard to improve its operations and growth capability since the pandemic began. The restaurant rebound has helped drive revenue and earnings to levels well above pre-pandemic times. 

In this light, Dave & Buster's stock trades at a deep value, echoing analysts' sentiment. The analysts lowered their targets following the third-quarter results, which may happen again now that fourth-quarter results are in, but the takeaway from their chatter is bullish. The analysts lowered their targets to a level where consensus expects a nearly 40% upside for share prices, and the stock is rated a "buy." 

Dave & Buster's Knocks it Out of the Park 

Dave & Buster's had a stellar fourth quarter, driven by organic growth, the acquisition of Main Event and a return of special event traffic. The company reported a record $563.7 million in quarterly revenue, a gain of 64.3% compared to last year. The revenue beat consensus by more than 300 basis points and is up 62% compared to 2019. The adjusted revenue growth, accounting for the acquisition of Main Event, is 28% year-over-year (YOY) and 30% compared to 2019, another strong figure. On a comp basis, store sales are up 19% across the network, with walk-ins up 12% and special event sales up 90%.

Margin news is favorable. The restaurant-operating income improved by 50 basis points to 30% of revenue, driving a similar increase in the company's operating margin. On the bottom line, the 80 cents in adjusted EPS is up 53% YOY, causing a healthy liquidity position for the company. The company's liquidity improved to $672 million, including $181 million in cash, with healthy cash flows expected to continue. The board declared a share repurchase program worth $100 million to investors, or about 5.7% of the post-release market cap. 

Is a Dividend Cooking? 

Dave & Buster's initiated a dividend in 2018 but had to suspend it in 2020 when the pandemic struck. That was a good move that helped to preserve capital in a time of need, but that time is over. The company is larger than before, with improved revenue-generating ability and healthy cash flow. The balance sheet is a fortress with ample liquidity, enough to initiate a share repurchase program so that the dividend may return soon. The former payout of 16 cents quarterly is worth about 1.7% annually, which would catalyze higher share prices. 

The charts show Dave & Buster's market trading near the bottom of a long-term trading range but showing signs of rebounding. The stock is up following the fourth-quarter release and offers support at the high end of the $30 to $33 range, a higher level than previously and a bullish indication within the trading range. 

The next hurdle is the 150-day exponential moving average (EMA). If the market can get above that, a move to the top of the range is possible. The top of the range is near $50, consistent with the Marketbeat.com analyst consensus estimate. 

Should you invest $1,000 in Dave & Buster's Entertainment right now?

Before you consider Dave & Buster's Entertainment, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Dave & Buster's Entertainment wasn't on the list.

While Dave & Buster's Entertainment currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Thomas Hughes
About The Author

Thomas Hughes

Contributing Author

Technical and Fundamental Analysis

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Dave & Buster's Entertainment (PLAY)
4.853 of 5 stars
$27.40+4.6%2.34%13.56Hold$53.38
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