UBS Lowers Dave & Buster's Price Target, Shares Fall 3%

Dave & Buster's (NASDAQ:PLAY) shares fell around 3% intra-day today after UBS analysts reduced their price target for the company to $56 from $66, while maintaining a Neutral rating.

The analysts anticipate that the company's Q1/25 earnings, scheduled for June 12, will reflect ongoing sales pressures. However, they expect that cost-saving measures will support EBITDA. Key investor expectations include a mid-single-digit decline in same-store sales (SSS) for the first quarter, falling below the consensus estimate of a 2.8% decrease. Additionally, many adjusted EBITDA forecasts are below the consensus of $184 million, despite a history of EBITDA beats, and it is anticipated that second-quarter sales trends will remain similarly pressured.

Investors are particularly focused on the sales trajectory and its implications for the second quarter, especially in light of easing comparisons and the rollout of several initiatives. They are also keen on updates regarding plans to bolster sales through remodels, food and beverage enhancements, and pricing adjustments. There is an expectation that the company will reiterate its 2024 development guidance, which includes 15 new units across both brands and up to four international locations.

UBS believes that potential upside exists for Dave & Buster's shares due to the company's unique business model, attractive margins, and effective execution of EBITDA growth opportunities. However, the analysts view the risk/reward balance as even, given the ongoing sales challenges, a difficult macroeconomic environment, and limited visibility into future sales trends.