Dave & Buster's Entertainment, Inc. PLAY is scheduled to report second-quarter fiscal 2024 results on Sep. 10 after the closing bell.
The company’s earnings have missed the Zacks Consensus Estimate in two out of the four trailing quarters, with the earnings surprise being 18.2%, on average.
The Trend in Estimate Revision
The Zacks Consensus Estimate for fiscal second-quarter earnings per share (EPS) is pegged at 93 cents, down 1.1% year over year. In the past 30 days, earnings estimates for the current year have witnessed downward revisions of 3.1%. The consensus mark for revenues is pegged at $567 million, indicating a 4.6% year-over-year increase.
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What the Zacks Model Unveils
Our proven model doesn't conclusively predict an earnings beat for PLAY this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: The company has an Earnings ESP of -17.20%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Influenced PLAY’s Q2 Performance
The company’s second-quarter fiscal 2024 performance is likely to have been hurt by dismal comps. Ongoing difficulties in maintaining or growing customer traffic are likely to have hurt the company’s comps. A complex macroeconomic environment affects consumer behavior, particularly with lower-income consumers showing more weakness than mid- and high-income groups. This pressure is likely to have contributed to the overall decline in traffic and sales.
Store expansions, a new games pricing strategy and enhanced Food and Beverage (F&B) offerings are likely to have aided the top line. Phases of Dave & Buster's menu of the future, along with a refined service model and remodeled stores. These stores feature social bases and VIP watch areas and are expected to have enhanced Special Event revenues in the fiscal second quarter.
Dave & Buster's strategic initiatives, including an enterprise gaming ecosystem, updated IT infrastructure and improved data analytics also bode well. Our model predicts that Food and Beverage and Entertainment revenues will increase 7.7% and 3.5% year over year to $195.2 million and $373.5 million, respectively.
Increased labor and marketing costs associated with rolling out new initiatives and tests might have had a negative impact on the company’s bottom line in the quarter to be reported. PLAY has been witnessing labor challenges in a handful of markets. Our model predicts total operating expenses to rise 5% year over year to $488.2 million in the fiscal second quarter.
Price Performance & Valuation
This year, PLAY stock has underperformed the industry and the S&P 500. Year to date, the stock has declined 44% compared with the industry’s drop of 1.7% and against the S&P 500’s appreciation of 15.9%. BJ's Restaurants, Inc. BJRI fell 16.9%, The Wendy's Company WEN declined 14% and Brinker International, Inc. EAT surged 66.7% in the same time frame.
Year-to-Date Performance Chart
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The company is currently valued at a discount compared with the industry on a forward 12-month P/E basis. PLAY’s forward 12-month price-to-earnings ratio is pegged at 8.81, significantly lower than the industry’s ratio of 23.53 and the S&P 500's ratio of 21.17.
P/E Ratio (F12M)
Image Source: Zacks Investment Research
Investment Thoughts
Potential investors might consider staying away from PLAY stock at the moment due to uncertainties surrounding its earnings performance, operational challenges, increased costs and challenging macro environment. The decline in comps and traffic is a major concern. The company is investing heavily in new stores, remodels and tech upgrades. While this spending aims to drive long-term growth, it represents a substantial outlay that impacts current financial flexibility.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Dave & Buster's Entertainment, Inc. (PLAY) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
