Please ensure Javascript is enabled for purposes of website accessibility

Why Dave & Buster's Stock Surged Higher Today

By Jon Quast - Mar 25, 2021 at 5:11PM

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

The stock is flirting with 52-week highs ahead of earnings next week.

What happened

Shares of Dave & Buster's Entertainment (PLAY -4.20%) defiantly surged higher on Thursday, flirting with 52-week highs. The stock finished the day up 12%. But unfortunately, there's really not a good explanation of what caused the move higher today. 

So what

Generally speaking, stocks go up when there's more demand for shares than there is supply. Typically, when a stock spikes higher, there's some news that's creating the demand that day. Perhaps it's a press release, a filing with the Securities and Exchange Commission (SEC), or an analysis by a prominent person. But for Dave & Buster's, none of these things apply today.

A businessman draws an exponential growth curve on a line graph.

Image source: Getty Images.

Dave & Buster's is going to report quarterly financial results on March 31. The company was one of the hardest hit restaurant stocks in 2020 since its business model (dine-in restaurant plus grown-up arcade) doesn't work with delivery, meaning a lot of investors have been betting against it by shorting it. In fact, 22% of the stock's float -- which is a lot -- was sold short as of March 15, according to Yahoo Finance. And it's up from February levels.

However, analysts have recently come out in favor of Dave & Buster's stock. According to The Fly, a Raymond James analyst raised the target price on the stock from $45 per share to $55 per share earlier this week. Considering earnings are next week, this bullish note could be motivating some traders to cover their short positions, which creates demand for shares. And it could also be causing investors to buy shares, hoping for an earnings surprise. 

PLAY Chart

Three-year returns for Dave & Buster's stock compared to the S&P 500. PLAY data by YCharts

Now what

While I can't say with certainty the reason why Dave & Buster's stock was in demand today, I can say that earnings next week matter a lot for long-term investors. Don't expect the 2020 numbers to be good compared to 2019. Look for where the company is improving, how its balance sheet is holding up, and listen to management's plan of action to get things back on track in 2021.

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
$37.39 (-4.20%) $-1.64

*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 service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

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.