Dave & Buster's Entertainment (PLAY 2.84%) had a rare hiccup this summer when it put out an uninspiring financial report, but a couple of analysts are starting to ring the dinner bell. Brian Vaccaro at Raymond James put out a bullish note on the high-volume eatery on Thursday, arguing that the recent weakness in the shares presents a buying opportunity.
Vaccaro is sticking to his Outperform rating on the stock but ultimately lowering his price target from $68 to $63.50. Then again, given the stock's sharp sell-off since its problematic guidance last month, Vaccaro's new goal represents a meaty 34% gain off of Wednesday's close.
His note follows a similarly bullish appeal by Piper Jaffray's Nicole Miller Regan last week. She also advised her readers to approach the stock's summertime decline as an entry point, sticking to her higher price target of $69.
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The bullish support hasn't translated into stock price buoyancy. Dave & Buster's shares have fallen in nine of the past 11 trading days. The stock has surrendered nearly 20% of its value since releasing its letdown of a quarterly report five weeks ago.
It was a rough quarter. Revenue may have risen at a 15% clip -- and more restaurant operators would love to be serving up double-digit top-line growth -- but that was the handiwork of expansion. Comps rose a modest 1.1%, and that was with gains on the arcade side offsetting a decline at the restaurant end of its business. Dave & Buster's also disappointed investors by lowering its EBITDA and comps guidance for all of 2017.
Last week's bullish note by Piper Jaffray's Regan pointed to sell-side reports playing up possible competitors to the chain with comparisons that she didn't think were valid. She sees the market changing its tune with Dave & Buster's comps rebounding in the fourth quarter before building on that momentum through 2018.
Vaccaro at Raymond James did lower his comps outlook for the second half of this year, but he feels that aggressive share repurchases will keep the stock's downside in check.
This isn't Dave & Buster's at its best, but it's still a company that has exceeded Wall Street's profit targets over the past 12 quarters since its return as a public company. The stock's trailing earnings multiple has now fallen to the high teens, and looking ahead finds the stock an interesting bargain at 17 times this year's projected earnings and just 16 times next year's target.
The bullish analysts and the reasonable valuation are here, and now it's time to see if investors are ready to follow suit.