Please ensure Javascript is enabled for purposes of website accessibility

Why Dave & Buster's Stock Fell Again Today

By Jeremy Bowman - Mar 13, 2020 at 3:59PM

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

Shares of the "eatertainment" chain continued to fall on coronavirus concerns.

What happened

Shares of Dave & Buster's (PLAY 2.84%) were tumbling again as investors continue to flee shares of the eat-and-play chain on fears of a widespread coronavirus epidemic.

The stock dropped today even as the broad market rebounded from yesterday's historic losses. Shares of the eatertainment chain were actually up this morning, but fell sharply as investors to continue to believe that Americans will avoid restaurants and gathering places like Dave & Buster's, for weeks, if not months, to prevent the spread of disease.

As of 3:18 p.m. EDT, the stock was down 13.9%.

The entrance to a Dave & Buster's location

Image source: Dave & Buster's.

So what

Dave & Buster's is now down 73% since Feb. 21 when the market began crashing. That compares to a 23% decline for the S&P 500, making the stock one of the worst performers on the market. That the stock still falls double digits even on a day when the broad-market index is up close to 4% shows that investors believe D&B could see significant damage from the outbreak.

The stock now trades at a price-to-earnings ratio of just around 4, though its results will no-doubt be affected by the outbreak. How much is unclear, as that depends on the duration and the severity of the outbreak, and how long people choose to avoid gathering places.

The company was already struggling before the outbreak as comparable sales have fallen for several quarters in a row. Its turnaround efforts will obviously be complicated by the outbreak.

Now what

Dave & Buster's has underperformed even some cruise line stocks in recent weeks, a sign, along with its valuation, that the stock may be oversold. Management may also choose to use this opportunity to buy back stock as the company has been aggressive about share buybacks over the past year.

Still, the company is going to take a financial hit over the coming weeks and the stock is likely to remain down until investors see better times ahead. We'll learn more when the company reports fourth-quarter earnings, which is expected in the beginning of April and will hopefully shed some light on the situation.

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.
PLAY
$33.71 (2.84%) $0.93

*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
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

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.