Why These 2 Dave & Buster's Analysts Are Far Apart After Q1 Earnings

Dave & Buster's Entertainment Inc PLAY reported first-quarter results Thursday that beat Street expectations and announced strong guidance for the second quarter.

RayJay Sees Impressive Sales Recovery: Raymond James analyst Brian Vaccaro reiterated a Strong Buy rating for Dave & Buster's Entertainment with a $55 price target. 

“The company's sales recovery has significantly exceeded our expectations with QTD comps down only 4% (vs. RJE down 20%) implying average weekly sales (AWS) in the mid-$190's (nearly $10M AUV),” the analyst said. 

“Much stronger profitability has ensued, with EBITDA expected to fully recover in 2Q21 vs. 2Q19 and 2021 EBITDA now expected (RJE) to exceed '19 levels (previously not expected until 2022),” he said. 

Even the higher-than-expected sales guidance for the second quarter could prove conservative in case “historical seasonality holds,” although the high per capita spend levels could moderate, Vaccaro said. 

RayJay raised its earnings estimate for the second quarter from 55 cents per share to 56 cents per share.

The firm also raised the earnings estimates for 2021 and 2021 by 54 cents to $1.83 per share and by 32 cents to $3.09 per share, respectively.

Wells Fargo Has Near-Term Concerns: Wells Fargo analyst Jon Tower maintained an Underweight rating for Dave & Buster's Entertainment and raised the price target from $44 to $45.

Although the fiscal first-quarter update highlighted progress on “the brand's return to pre-crisis AUVs” and cost savings initiatives, the analyst said. 

The pandemic failed to “knock off a substantial piece of PLAY's traditional competitive set and this group is expected to grow stores again in the future (not to mention growth in non-traditional channels),” he said. 

“F1Q was solid, but this was generally expected by most investors we spoke with, and we're not certain there was enough new from call/results to alter the thesis.”

He also cited “lower visibility into new store growth, SSS and free cash flow growth relative to history.”