Please ensure Javascript is enabled for purposes of website accessibility

Dave & Buster's Stock: Next Stop, $72?

By Rick Munarriz - Mar 21, 2017 at 2:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Maxim is the latest analyst firm to wax bullish on the entertainment and dining company. The analyst there is initiating coverage with a buy rating and a $72 price target.

Dave & Buster's Entertainment Inc. (PLAY -2.18%) is bucking the "restaurant recession" malaise that has tripped up a lot of publicly traded eateries these days. The stock hit an all-time high of $61.20 last week, and at least one Wall Street pro sees the shares moving even higher.

Maxim analyst Stephen Anderson initiated coverage of Dave & Buster's on Tuesday. He's tagging it with a buy rating. His $72 price target implies 21% of upside off of Monday afternoon's close.

Bullish analyst initiations are always welcome, but the timing of this rosy view is important. Dave & Buster's reports quarterly results next week, shortly after Tuesday's market close. Anderson's bullish move just six trading days before the earnings announcement is encouraging. If he was feeling uneasy about the report -- a reasonable concern given the restaurant implosions that we've seen -- he would've held back a week and chimed in after the earnings release.

Four adults playing a video game at Dave & Buster's.

Image source: Dave & Buster's.  

D&B plays to win

Dave & Buster's stock has nearly quadrupled since going public at $16 less than three years ago. Healthy double-digit growth on the top line has been the handiwork of brisk expansion and refreshingly positive comps. Same-restaurant sales rose 5.9% in its fiscal third quarter, a far cry from its peers. Profits are growing even faster. Net income more than doubled in its latest quarter.

The concept is unique. You won't find too many restaurants where food and beverage sales account for less half of the revenue mix, but that's Dave & Buster's. A little more than half of its business comes from its high-end arcade stocked with the latest video games and a few classic throwback diversions. These are high-margin gaming machines, and it distances Dave & Buster's from traditional table-service chains that live and die by food and labor costs. 

Comps won't always be positive. Dave & Buster's courts young adults with disposable income looking for a one-stop entertainment shop. If the economy starts to tank, there will be less money for revelers at D&B to spend on games, booze, and grub.

Maxim's Anderson isn't alone. The last major analyst to initiate coverage on Dave & Buster's was SunTrust, slapping it with buy rating and a $68 price target three months ago. In January we saw Nicole Miller Regan at Piper Jaffray reiterate her bullish view, raising her price target from $57 to $63 after channel checks turned up healthy sales momentum. 

Now we're a week away from another financial report, and this comes from a company that has beaten Wall Street's profit targets with ease in each of its first nine quarters as a public company. Momentum remains in Dave & Buster's corner for now.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
$34.95 (-2.18%) $0.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.