Dave & Buster's Shares Tank Following Earnings Report, Analysts Say CEO Exit Clouds Turnaround Prospects

Shares of Dave & Buster’s Entertainment Inc PLAY fell over 14% at last check Wednesday, despite reporting downbeat third-quarter results.

• Truist Securities analyst Jake Bartlett downgraded the rating from Buy to Hold, while slashing the price target from $56 to $36.
• Benchmark analyst Mike Hickey maintained a Hold rating on the stock.

Check out other analyst stock ratings.

Truist Securities: Dave & Buster’s reported its adjusted EBITDA at $68.3 million. That’s short of the consensus of $75.8 million. Same-store sales and store-level margins drove the shortfall, Bartlett said. Consolidated same-store sales fell by 7.7%, much worse than consensus of a 5.9% decline, while store-level margins contracted by 160 basis points, he added.

This was the seventh consecutive quarterly sales miss, the analyst stated. The unexpected resignation of CEO Chris Morris, who had devised the turnaround plan, added to the uncertainty around its execution, he noted.

The CEO departure, along with disappointing sales lifts from recent remodels, "shakes our confidence in PLAY’s sales catalysts," Bartlett further wrote.

Benchmark: Dave & Buster’s reported disappointing third-quarter results due to challenging macro conditions, "growing pains" from some of the strategic initiatives, and slightly longer-than-expected implementation for some initiatives, Hickey said in a note. Management expressed their frustration around the strategic initiatives not yielding the desired results due to the macro environment, he added.

"The departure of CEO Chris Morris adds an additional friction to executing the second half of PLAY's strategic plan," as he was the "primary architect" of the plan that was launched around 18 months ago, the analyst wrote. Management guided to full year adjusted EBITDA of $500 million to $515 million, below the consensus estimate of $525 million, he further stated.

Price Action: Shares of Dave & Buster’s declined by 14.04% to $31.64 at the time of publication on Wednesday.

Read More:

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

Image: Shutterstock