Dave and Busters: Zacks’ Bull of the Day Play

Restaurant stocks have been quite hot lately thanks mainly to improving labor market and savings from low gas prices. The outlook for the industry remains positive in view of the upcoming holiday season when people tend to spend more on eating out and entertainment.

Dallas based Dave and Buster’s Entertainment (PLAY) operates an arcade and restaurant chain that combines entertainment and dining in one location. The company was founded in 1982, when two friends Dave and Buster, who respectively ran a bar and an arcade side by side in Little Rock, Ark., decided to combine the businesses. They IPOed in October last year with an offer price of $16 a share.

The chain targets adults aged between 21 and 39, with average household income of approximately $80,000. They aim to provide their guests the experience of “Eat, Drink, Play, Watch” all in one location.

In addition to providing strong sports viewing package and promotions, they also aim to provide compelling venues for corporate and social special event parties.

Solid Second Quarter Results and Improved Guidance

Total revenues for the quarter increased 19.8% year-over-year to $217.3 million. Amusement and other sales grew 22.4% while food and beverage revenues increased 16.8%.

Comparable store sales rose 11% compared to a 5.7% increase in the same quarter last year. Earnings of $0.40 per share were significantly ahead of the Zacks Consensus Estimate of $0.23 per share. The company has beaten Zacks Consensus Estimates in all of last four quarters, with an average quarterly surprise of 33.7%.

The management now sees total 2015 revenues between $844 million and $853 million, up from the previous range of $822 million and $831 million.

Rising Estimates

After excellent results and upgraded guidance, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year are now $1.27 per share and $1.51 per share respectively, up from $1.07 and $1.31, before the results.

The Bottom Line

The company has a widely recognized brand that is highly differentiated from conventional casual dining. Games are the main brand differentiator for them as they aim to provide an experience that cannot be easily replicated at home. They currently operate about 77 stores in the US and Canada and thus have significant expansion potential.

Further, effective execution of several strategic initiatives will continue to drive growth going forward. While the stock is currently near its al-time high, it appears well poised to continue its upward trend.

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– See more at: http://www.zacks.com/commentary/pdf/58441/bull-of-the-day-dave-and-busters-play#sthash.buCSgIBh.dpuf

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