Dave & Buster's price target raised to $30 by Piper Sandler on improving sales

Piper Sandler raised its price target on Dave & Buster's to $30 from $22, maintaining a Neutral rating, following a fiscal first-quarter earnings report that revealed an 8.3% decline in same-store sales, missing expectations. Despite the miss, improving monthly sales trends, attributed to "back to basics" initiatives like TV advertising and Eat & Play combos, prompted the price target increase. Loop Capital also raised its price target to $46, citing positive early trends in Q2, even though Dave & Buster's reported EPS of $0.76, below the expected $1.01, and adjusted EBITDA of $136 million, also slightly below expectations.

Analysis

Dave & Buster’s (NASDAQ:PLAY) reported mixed fiscal first-quarter 2025 results, with earnings per share of $0.76 missing the $1.01 forecast and same-store sales declining 8.3%, underperforming expectations. While total revenue of $568 million marginally exceeded one consensus estimate ($567 million) but fell short of another ($573.25 million), and adjusted EBITDA of $136 million (24% margin) was slightly below expectations, the company demonstrated a significant positive in its sales trajectory. Same-store sales declines moderated sequentially, from 11.9% in February to 8.4% in March, 4.3% in April, and a substantially improved 2.2% decline quarter-to-date in Q2. Management attributes this recovery to "back to basics" initiatives, notably a return to television advertising and more effective utilization of Eat & Play combo offerings. This improving momentum prompted Piper Sandler to raise its price target to $30.00 (from $22.00, Neutral rating) and Loop Capital to increase its target to $46.00 (from $35.00, Buy rating). Dave & Buster’s growth strategy includes opening 10-12 new stores in FY2025, with capital expenditures capped at $220 million, alongside investments in new game cabinets, attractions, and a store manager incentive plan aimed at bolstering same-store sales. The overall sentiment from the provided signals is mildly positive, suggesting cautious optimism regarding the company's turnaround efforts.

Key Decisions for Investors

• Investors should closely monitor the Q2 same-store sales figures to confirm the durability of the recent positive trend, as this is pivotal to validating the optimistic analyst outlooks despite the Q1 earnings shortfall.
• Assess the potential return on investment from new store openings and capital expenditures, particularly how effectively new attractions and management incentives can offset persistent comparable sales pressures.
• Consider the valuation implications of the increased price targets against the backdrop of current performance, weighing the recovery narrative against broader consumer discretionary spending trends and the execution of strategic initiatives like new game cabinets and store manager incentives.