Analysts React To Dave & Buster's Guidance Cut

Dave & Buster’s Entertainment Inc PLAY shares are down after cutting 2019 sales guidance on Tuesday.

Raymond James analyst Brian Vaccaro said a further deterioration in comps offsets the stock’s low valuation and potential activists.

“Amusement comps (high margin) have turned incrementally negative on difficult VR/HALO comparisons while recent F&B value initiatives have failed to gain traction,” he wrote in a note.

“Management communicated several near-term initiatives to revitalize the brand, streamline costs, and work towards a more flexible new unit growth pipeline, though increased competition remains a primary headwind.”

Vaccaro downgraded the stock from Outperform to Market Perform.

See Also: Wall Street Sours On Dave & Buster's

Wells Fargo analyst Jon Tower said the company’s second-quarter same-store sales results and third quarter-to-date same-stores sales did little to bolster investor confidence that a turn in the business is at hand.

Tower said unit growth is near the highest within the industry and investors have not yet been willing to award the shares a premium for this growth.

“Management appears to be heeding the investor sentiment, suggesting that the company will step-up the rigor around new store growth decisions and potentially slow down the pace of growth as soon as F2H20,” he wrote in a note.

Tower also believes the company may explore new sales channels, including hosting e-sporting events as well as potentially looking into the sports betting partnerships, similar to what Buffalo Wild Wings did recently with MGM Resorts International MGM. That said, “neither are likely to remedy what ails sales in the near-term,” he said.

Wells Fargo maintains a Market Perform rating with a $40 price target.

Dave & Buster’s shares traded down 6.4% to $40.92 at time of publication.

Photo credit: Mike Mozart, Flickr