Key Points
- Dave & Buster's insiders are buying the stock.
- Institutional support is high as well, but the outlook may cap gains.
- The next EPS report is in December and it could surprise the market.
Dave & Buster’s (NASDAQ: PLAY) has been an interesting rebound story for two reasons and now it may be getting better. The first two reasons are the slow nature of the rebound’s beginning and the peak that it has taken the business to. In regard to speed, the rebound in sit-down restaurants like Dave & Buster’s did not really gain momentum until the past 12 months and now its business is well above the prepandemic level. In that light, shares should be trading well above where they are now but they aren’t because of the margin. The company’s margin took a big hit in Q2 due to rising costs, rising wages, and the acquisition of Main Event and that has been pressuring the stock price. The company’s CEO, however, made comments to the effect margins should begin to improve as soon as the current quarter, a sentiment that is backed up by a string of insider purchases that helped to put a bottom in the stock.
Dave $ Buster’s Is Getting Squeezed
Dave & Buster’s insiders have been buying the stock since July. Starting with CEO Christopher Morris on July 13th, 2022, there have been 6 insider transactions from 5 company insiders. Insiders include the CEO, CFO, COO, an SVP, and a major shareholder. The major shareholder is Path D Fund LP Hill which has made 2 purchases in the last few months and owns a little more than 10% of the company. As it is, in the last year, the insiders and institutions have purchased more than 13% of the market cap with shares trading near $36. This has the total ownership up to over 100% due to a relatively high 13% short interest. This has the market in a volatile position that could result in a rapid increase in share prices should the next quarterly report come in strong.
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The analyst's activity in Dave & Buster’s stock has been mixed this year but one thing is clear, the analysts see potential in this stock. The 8 analysts covering the stock with current reports have it pegged at a Moderate Buy which is slightly stronger than the Moderate Buy posted two quarters ago. The price target, which has seen an equal number of increases and reductions, is down from a peak set earlier this year but holding steady near its highs and more than 40% above the recent price action. The stock may wallow in the near term but it looks like it should move higher in the mid to long term.
The most recent earnings report came out in September and brought some mixed news. The company’s revenue surged 24% and outpaced the consensus but margins were weak. The EPS came in well below the target and was accompanied by an outlook for similar weakness in Q3. The Q3 revenue is expected to surge again, this time by 49% YOY and 60% versus 2019, but earnings will be very weak at $0.07. This is down on a YOY and 3-year basis and may keep the stock from breaking out to a new high if margin pressure can not be overcome.
The Technical Outlook: Dave & Buster’s Is Range Bound
The insiders and institutions have put a bottom in Dave & Buster’s but it is still range-bound at this time. The bottom is coincident with the bottom of a range that has been in place for two years. The action may move higher within this range but will most likely be capped near $45 or $50 if earnings don’t improve. In that scenario, Dave & Buster’s will likely trend sideways within the current range until there is a fundamental improvement in profitability.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Dave & Buster's Entertainment (PLAY) | $34.27 | +0.1% | 1.87% | 12.51 | Moderate Buy | $62.57 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
