3 Beaten Up Experiential Stocks to Cash in on a Good Time

Key Points

• Dave & Busters continues to recover post-pandemic but saw same-store sales fall 6.3% YoY in its second quarter of 2024.
• Bowlero is the nation's largest bowling center operator, with over 350 venues, and continues to pursue a growth-by-acquisition strategy.
• Topgolf Callaway Brands announced it would be re-splitting into two separate companies upon final Board approval in the second half of 2025.

Can you put a price on happiness? Apparently so, not only can you put a price on it, but also a valuation, market cap, price-earnings ratio and a number of other financial metrics. Experiential activities are fun, memorable and not often duplicated at home. They are immersive 4-D experiences with an alternate backdrop that can transport you away from reality for a moment.

Here are 3 experiential stocks in the consumer discretionary sector that have taken a beating but could bounce back as the economy recovers.

Dave & Busters

Walking into a Dave & Buster’s Entertainment Inc. NASDAQ: PLAY venue is the essence of an experiential experience. These 40,000 to 60,000 square feet complexes house a sports bar, restaurant dining area and a massive carnival-like Midway video game arcade outfitted with the latest immersive games. Some even have bowling lanes, laser tag, virtual reality games and pool tables.

The loud music and sound effects can awaken your senses and make you pry open your wallet having a good time for kids and adults alike. The company operates 226 locations which include 166 Dave & Busters and 60 Main Event entertainment and dining venues.

Same Store Sales Weakness Was Offset By Improving Margins

Dave & Busters has been recovering since the pandemic but isn't immune to tightening consumer spending, as evidenced by the 6.3% YoY drop in same-store sales (SSS) in the second quarter of 2024. They reported EPS of $1.12, beating consensus estimates by 28 cents. Revenues edged up 2.8% YoY to $557.1 million, coming in shy of the $560.65 million consensus estimates.

They reported an 8.1% YoY increase in adjusted EBITDA to $11.3 million. Operating margins improved to 15.1%, driven by operational efficiencies and pricing strategy. The company remodeled 9 locations and opened 2 new Dave & Buster's stores in Port St. Lucie, Florida and Johnson City, New York.

Bowlero

With over 350 bowling locations across North America, Bowlero Inc. NYSE: BOWL is the largest operator of bowling entertainment centers in the country. The company operates under AMG, Bowlmor Lanes, Lucky Strike and Bowlero brand names, serving 40 million customers annually. Additionally, they also own the 60-acre Raging Waves waterpark in Yorkville, Illinois. In 2019, Bowlero acquired the Professional Bowlers Association (PBA), which is the major league of bowling. The promotion of PBA matches helps to draw more fans and players to Bowlero centers.

An Acquisition Strategy That’s Finding More M&A Opportunities

Bowlero has been consolidating the bowling industry and will continue to acquire more locations at attractive prices.

Bowlero Founder and CEO Thomas Shannon commented, "The initial results of these acquisitions have been outstanding, including record profitability at Lucky Strike and double-digit year-over-year revenue growth at Raging Waves. We expect to achieve returns similar to our successes with the acquisitions of centers from AMF, Brunswick, Bowl America, and 40+ independents. Recently, economic factors have increased M&A opportunities, and we expect to continue executing our playbook of buying assets at attractive prices and systemically improving them.”

Delivering Solid Results for its Fiscal Fourth-Quarter 2024

Bowlero reported its fiscal fourth quarter of 2024 EPS loss of 43 cents and an 18.56% YoY revenue surge to $283.8 million, beating consensus estimates by $10.21 million. Same-store revenue increased 6.9% YoY to $242.5 million. Adjusted EBITDA improved to $83.4 million, up from $64.5 million in the year-ago period.

Bowlero expects fiscal 2025 revenue to rise mid-single digits to 10% YoY or revenue of $1.22 billion to $1.28 billion versus $1.24 billion consensus estimates.

Topgolf Entertainment Venues

Topgolf Callaway Brands Co. NYSE: MODG operates over 80 Topgolf venues, which house a sports bar, restaurant and technology-enabled hitting bays and event spaces along with Toptracer ball-flight tracking technology. Topgolf facilities are 3-story, 65,000 square foot indoor/outdoor venues with 102 hitting bays.

It also operates Callaway Brands, which sells golf clubs, equipment and apparel under global brands, including Callaway Golf, Topgolf, Toptracer, Odyssey, OGIO, Jack Wolfskin and World Golf Tour. The combination of the two businesses was supposed to provide a seamless golfing experience, complete with golf clubs, gear and a driving range. However, the $2 billion merger has not impressed investors as shares have fallen from a peak of $37.75 in June 2021 to a low of $9.05 on Sept. 12, 2025.

Topgolf Venue Business Outshines Its Equipment and Apparel Business

Topgolf Callaway Brands reported Q2 2024 EPS of 42 cents, beating analysts by 14 cents. Revenues dropped 1.9% YoY. Same venue sales dropped 8% YoY.

The Topgolf segment reported a 26.1% YoY jump in revenue to $56.1 million. The Golf Equipment segment had a 10.4% YoY drop in revenue to $77.4 million. The Active Lifestyle apparel business had a 30.6% drop in revenue to $14.7 million.

The Company Lowers Guidance

On a weak note, the company lowered its fiscal full year 2024 EPS to 11 cents to 21 cents, down from the previous estimate of 31 cents to 39 cents versus 33 cents consensus estimates. Revenue was lowered from $4.2 billion to $4.26 billion, down from a previous forecast of $4.43 billion to $4.45 billion versus $4.45 billion consensus estimates.

The gloomy guidance prompted Top Golf CEO Tom Brewer to state, "As we look forward, we remain convinced that Topgolf is a high-quality business with significant future opportunity. It is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time. At the same time, we have been disappointed in our stock performance for some time, as well as the more recent same-venue sales performance. As a result, we are in the process of conducting a full strategic review of Topgolf.”

Re-Splitting the Merger into Two Separate Entities

On Sept. 4, 2024, Topgolf Callaway Brands announced it would be splitting the company back into two independent public companies, Topgolf and Callaway. The company will spin off its Topgolf business to Topgolf Callaway shareholders in a tax-free transaction. The spin-off will likely be in the form of a stand-alone public company.

Topgolf Callaway Brands Chairman John Lundgren stated, "Today's announcement is the result of a thorough strategic review conducted by the Board of Directors and the management team. The creation of two independent companies, each with a distinct focus and proven business model, is intended to drive continued momentum in both businesses and deliver value to all our shareholders."

Incidentally, MODG stock initially gapped nearly 12% on the news to peak at $11.41, only to sell off in the following days to a new 52-week low of $9.05. The company is now developing a detailed separation plan for final Board of Directors approval, targeting the spin-off to execute in the second half of 2025.