Dave & Buster's Shares Up 10%; Piper Jaffray Reiterates Overweight

Piper Jaffray analysts Nicole Miller Regan and Joshua Long have reiterated their Overweight rating on Dave & Buster's Entertainment, Inc. PLAY. They have increased their price target to $51.00 from $49.00 on the company's stock.

The brokerage said the Dave & Buster's system continued to outperform the industry as far as same-store-sales are concerned. For the first quarter, same-store sales were +3.6 percent compared to its +3.0 percent expectation. As a result EPS came in at $0.72 compared to consensus expectations of $0.59.

The analysts said, "We reiterate our Overweight rating and our price target moves to $51 (vs. $49 prior) on a maintained ~11x multiple on now higher FY16E EBITDA. This multiple is a premium to the median of our coverage universe currently trading at ~10x FY16E EBITDA and a premium to full service names trading at ~9x reflecting the company's differentiated positioning, unit growth opportunity, and operational momentum. On a sensitivity basis we note that each 1x in EBITDA multiple equates to ~$5/share."

Piper Jaffray said brand modernization efforts are driving momentum. The brokerage remained intently focused on stocks exhibiting concept brand equity and the potential for high-margin ancillary sales, both of which support operational and earnings consistency.

The analysts are encouraged by Dave & Buster's recently announced $100 million share buyuback authorization which would be used mainly to offset dilution from performance incentives. While not in the plans currently, the analysts said, "we believe there is an opportunity for the company's excess cash flow to eventually be used for debt paydown or deployed back to shareholders via incremental share repurchase and/or dividends."

The stock traded 10.08 percent higher on Wednesday.