Dave & Buster's Gets 2nd Upgrade This Week

Dave & Buster's Entertainment Inc PLAY won over another Wall Street analyst after the entertainment and dining chain completed a high yield bond offering.

The Dave & Buster's Analyst: Raymond James analyst Brian Vaccaro upgraded Dave & Buster's from Outperform to Strong Buy with a price target lifted from $20 to $25.

The Dave & Buster's Thesis: Dave & Buster's priced a $550 million senior note offering that will be used to repay an existing term loan and reduce its existing revolver, Vaccaro wrote in the note. The new offering will also lift its available liquidity to around $350 million and this will be sufficient to cover nearly two years worth of burn rates.

But existing burn rates could ease moving forward as sales are likely to continue recovering despite the ongoing COVID-19 pandemic, the analyst wrote. Data from Placer.ai and Raymond James shows Dave & Buster's weekly U.S. traffic trends were at its lowest in late May at down 88.6%.

The company has seen a steady improvement since then as the most recent data for the week Oct. 11 shows traffic improved to down 55.3%.

The encouraging recent trends has prompted some investors to evaluate multiple post-COVID EBITDA recovery scenarios as consumers are showing a willingness to return to the brand.

PLAY Price Action: Shares of Dave & Buster's closed Wednesday up 1.9% at $19.15.