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Coronavirus Fears Return, Crushing Dave & Buster's Stock

By Jon Quast – Jul 27, 2020 at 4:32PM

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Some things are shutting down, and this company does poorly when people stay home.

What happened

There wasn't any news today for Dave & Buster's Entertainment (PLAY 2.59%), but that didn't keep shares from tanking on Monday. The stock fell 8% for the day as investors are seemingly getting nervous about the ongoing coronavirus situation. 

Among restaurants, Dave & Buster's is especially ill-suited for to-go dining. As the COVID-19 pandemic has forced people to stay home more, the company's business has suffered. It's why the stock is still down around 70% year to date.

PLAY Chart

PLAY data by YCharts

So what

Fresh coronavirus news is shaking investors up. For example, Major League Baseball players for the Miami Marlins tested positive for COVID-19, causing the league to postpone the team's home-opening game. Also, Kentucky's governor has decided to close bars again for two weeks and limit indoor restaurant seating capacity to 25%. 

These are just two examples of growing coronavirus concerns. Could we be headed for a second round of a shutdown? If so, that would be worse for Dave & Buster's than others.

Some fast-food companies thrived when diners were sheltering at home. For example, Wingstop saw its same-store sales surge 33% higher in April. Casual-dining restaurants didn't do so hot, but some were able to limp along by pivoting to to-go orders. Texas Roadhouse sales fell over 70% at the worst of the shutdown, but some stores are now generating $100,000 in weekly to-go orders as the company tries to just hang on.

For Dave & Buster's, it offers customers an in-store arcade experience. That's why it closed all of its locations when shelter-in-place guidelines were laid out. That obviously led to a steep drop in sales

A concerned man places his hands on his head while staring at a large, red, down stock chart.

Image source: Getty Images.

Now what

For Dave & Buster's, it's done things to ensure survival. It's cut spending, cut its dividend, and raised new funds by offering stock. It had $157 million in cash and cash equivalents at the end of its first quarter. Between this and the more than $100 million it raised, it can surely make it the rest of the year.

Even still, I can understand investors' concerns today. With stocks creeping back toward all-time highs, now is a great time to evaluate your portfolio. Assessing which companies are most likely to create shareholder value over the long term, irregardless of macroeconomic pressure, is always a good process to go through when investing in stocks.

Jon Quast owns shares of Texas Roadhouse. The Motley Fool owns shares of and recommends Texas Roadhouse. The Motley Fool recommends Dave & Buster's Entertainment and Wingstop. The Motley Fool has a disclosure policy.

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