Dave & Buster’s Stock is Ready to Breakout

Interactive entertainment restaurant operator Dave & Buster's Entertainment, Inc. NASDAQ: PLAY stock has been resilient during the post-pandemic market sell-off. The iconic dine and play chain has all its 143 stores operating in the quarter with the addition of one new store. Despite the resurgence of the COVID-19 omicron variant, the Company fundamentals continue to rebound as consumers continue to flock to restaurants and entertainment venues. The Company will undertake a remodel program to bolster existing store traffic. The strategy is to replace a 70,000 square foot store built 30 years ago into two smaller stores in strategic locations with more relevant markets with accelerating growth. The Company plans to amplify its offerings in the summer games rollout with “significant” market campaigns. Prudent investors seeking exposure in a dining and entertainment play can look for opportunistic pullback levels in shares of Dave & Buster’s.

Q3 FY 2021 Earnings Release

On Dec. 7, 2020, Dave & Buster’s released its third-quarter fiscal 2021 results for the quarter ending October 2021. The Company reported an earnings-per-share (EPS) profit of $0.21 excluding non-recurring items versus consensus analyst estimates for a profit of $0.13, beating estimates by $0.08. Revenues rose 191.6% year-over-year (YoY) to $317.98 million and missing the $319.74 million consensus analyst estimates. Comparable same store sales (SSS) rose 1.1% versus 2019. The Company expects positive comparable SSS compared with Q4 2019. Dave & Buster’s interim CEO David Sheehan commented, “Since assuming the role, I have been impressed with our team’s hard work and dedication to operating in this evolving environment. I am excited to be working with them as we look forward to more normalized operations across our stores. We have begun a new phase of innovation, growth, and value creation with a focus on realizing the Company’s significant upside potential. I am excited about the future and look forward to sharing our progress with all of our stakeholders.”

Conference Call Takeaways

Interim CEO Sheehan set the tone, “As you know, we have made great progress in reopening and building back sales, but we also know there is a lot more to do to unlock the substantial potential of this business. As I said in our press release, we are beginning a new phase of innovation, growth, and value creation here at Dave & Buster's. Let me share with you what I mean. We have a great brand with significant scale, a passionate team, and accretive stores in high traffic, high volume destination trade areas. Our intent is to optimize our current stores’ full potential and accelerate innovation to drive incremental traffic to our brands. In order to accomplish this goal, we are laser-focused on organic growth. This will be accomplished by optimizing the performance of our existing stores, while continuing to achieve best in class returns on our new stores. With respect to organic growth, we will broaden our entertainment offering to include more immersive sports viewing experiences, including improvements to the watch environment and the addition of fantasy sports and in sports betting option as permitted. We also see significant opportunity to drive traffic in our off peak days and dayparts, and we are evaluating a variety of initiatives to extract more value out of our existing stores. Finally, we will amplify our best-in-class arcade with the summer games rollout supported by a significant marketing campaign.

To help fuel organic growth, we will accelerate a refresh remodel program that will give our existing stores a fresh look. And we are also evaluating relocation opportunities in some of our legacy markets where we can open new, more efficient stores and capitalize on higher potential locations. Think of one 75,000 square foot store built 30 years ago in a part of town that has become less optimal and replacing that store nearing the end of its lease term with possibly two strategically located new stores in more relevant parts of town that accelerate growth in that market. Think one plus one equals three.”

He concluded, “Finally, we will continue to refine our store layouts and sizes to optimize their market potential. We are making significant progress in this area and recent results are showing much higher returns than anticipated. This will meaningfully expand our brand's potential in coming years. I'm very excited about the future of this company. We have meaningful upside. And as you can see from our third quarter results, we are on our way to realizing that potential.

PLAY Opportunistic Exit Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for PLAY stock. The weekly rifle chart bottomed out at the $29.81 Fibonacci (fib) level. The weekly rifle chart is attempting to bounce with a rising 5-period moving average (MA) at $36.83 as it tries to crossover the 15-period MA at $37.03. The weekly stochastic coiled back up off the 30-band triggering the weekly market structure low (MSL) buy on a break through $36.45. The weekly Bollinger Bands (BBs) have also been in a tightening compression range between $30.20 lower BBs to $44.20 upper BBs. The daily rifle chart is in a make or break with a flat 5-period MA at the $38.71 fib versus the rising 15-period MA at $38.03 as the stochastic forms a mini inverse pup to test the 80-band. Prudent investors can watch for opportunistic pullback levels at the $37.45 sticky 2.50s level, $35.17 fib, $33.06 fib, $29.71 fib, $26.64 fib, and the $24.39 fib level. Upside trajectories range from the $43.68 fib level up towards the $55.55 fib level.