Dave and Buster’s: Zacks’ Bull of the Day Play

Dallas based Dave and Buster’s Entertainment (PLAYFree Report) 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, AR, decided to combine the businesses. They IPO’d in 2014 with an offer price of $16 a share.

They currently operate 88 stores in the US and Canada, which target adults aged between 21 and 39, with average household income of approximately $75,000. 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 are also aim to provide compelling venues for corporate and social special event parties. Special events comprised ~11% of fiscal 2015 revenue.

Excellent Third Quarter Results and Improved Guidance

The company posted better than expected results for its third quarter, beating on both the top and bottom lines and also raised guidance for the fiscal year.

Earnings of 25 cents were way ahead of the Zacks Consensus Estimate of 13 cents per share and up 108% year-over-year. Revenues of $228.7 million also beat the Zacks Consensus Estimate of $213 million and were up 18.6% year-over-year.

The management raised their full-year guidance. They now expect total revenues to be in the range of $998 million to $1.003 billion and net income in the range of $86.5 million to $88.5 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 $2.05 per share and $2.35 per share respectively, up from $1.93 and $2.23, before the results.

The company has a pretty impressive record of beating the estimates; in fact, it has never missed since it went public.

DAVE&BUSTRS ENT Price, Consensus and EPS Surprise

The Bottom Line

The company has a widely appealing and 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. While many other restaurant chains have been struggling in an over saturated market, PLAY has been able to outperform the broader industry with their entertainment business.

Additionally with just 88 stores in the US and Canada, they have significant expansion potential.

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