What happened

Wall Street is turning more bullish on dine-in restaurants. Many casual-dining stocks are up today, including Dave & Buster's (NASDAQ:PLAY). Shares surged on Wednesday, and as of 12:30 p.m. EDT were trading 24% higher.

The Cheesecake Factory (NASDAQ:CAKE) updated shareholders on its business, and it's possibly contributing to improving investor sentiment for Dave & Buster's. The Cheesecake Factory said it's reopened about 25% of its restaurants with limited dining capacity. Despite this challenge, opened restaurants are doing 75% of the business they were prior to the coronavirus. 

PLAY Chart

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So what

The Cheesecake Factory's business update suggests consumer demand for dine-in restaurants is still very strong. Diners are ready to go back out to eat. And that's good news for a company like Dave & Buster's. Its business model of games and food is predicated on in-restaurant activity. 

Dave & Buster's is already reopening where it's allowed. So it's possible its business is starting to return just like The Cheesecake Factory. 

The reopening is far ahead of Wall Street's timetable when fear ran high in March. Maybe this, too, contributes to Dave & Buster's stock gains today. Consider that short interest in this stock -- people betting against it -- increased throughout March and April, according to data available from Nasdaq. The shorts certainly expected locations to be closed for much longer. But now that Dave & Buster's is reopening, many are rethinking those short positions. Evidence for this includes a 17% drop in short interest during the first half of May.

A hand plots a chart higher.

Image source: Getty Images.

Now what

Dave & Buster's stock was largely left for dead when it fell around 90% earlier in the year. The worst fears for this consumer-discretionary stock included bankruptcy, as the company struggled with liquidity as its revenue completely evaporated overnight. But since then, the stock has recovered as it solved its cash problems.

Yesterday, Dave & Buster's set the date for its upcoming results for the first quarter of 2020. The company will report on June 11. If any short sellers were already considering covering their positions, this announcement increased their urgency.