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Why Dave & Buster's Entertainment Soared 20% Today

By Rich Duprey - May 27, 2020 at 5:00PM

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The entertainment-focused restaurant operator has a lot to prove in the months ahead.

What happened

Restaurant operator Dave & Buster's Entertainment (PLAY -5.10%) soared 19% on Wednesday as its stock got caught up in the euphoria surrounding businesses reopening around the country.

So what

The entertainment-themed eatery did not have restaurants open during the shutdown, as many of its casual dining rivals did, since it did not have a takeout business in place. Consumers go to its restaurants as much for the atmosphere as the food and drink, so reopening its restaurants is essential for getting going again.

Dave & Buster's restaurant interior showing brightly lit gaming machines.

Image source: Dave & Buster's Entertainment.

Now what

Dave & Buster's was already in trouble before the COVID-19 pandemic hit, with CEO Brian Jenkins telling analysts, "Currently, our dining rooms are the least-visited space in our four walls."

Earlier this year, though, private equity firm KKR revealed it had taken a 10.7% stake in the chain with an eye toward shaking up the company toward improving performance, though it didn't detail any specific plans.

At the time, Dave & Buster's stock had been trading at around $42 a share and briefly surged higher on the activist investor's position, but the shares began tumbling as the coronavirus outbreak began to gather steam, and then they lost 90% of their value the next month.

The stock has more than tripled since those dark days, and shares have rallied several times over the last few weeks. With states allowing businesses to reopen, though, this is the first chance it has to show it can make good on its promise for change.

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Stocks Mentioned

Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
PLAY
$32.38 (-5.10%) $-1.74
KKR & Co. Stock Quote
KKR & Co.
KKR
$47.34 (-0.65%) $0.31

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

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