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Dave & Buster’s struggles are not over, but the sell-off in its stock is, and the reversal is underway. The fiscal year 2026 (FY2026) Q3 results reveal that the CEO change, Back-to-Basics strategy, and restaurant remodels are having a positive impact. While the results missed MarketBeat’s reported consensus, the miss was slim, sequential growth was logged, and a favorable outlook was implied. The market reaction was a double-digit surge in share prices, driven by accelerated trading volume, confirming support at long-term lows and indicating a double-bottom is in play.
The double bottom is a classic reversal signal in which the market hits its bottom, rebounds, hits its bottom again, and then continues higher. In this case, signs of improving business sparked the bottom, and now, an improving outlook will likely drive the market higher over the coming weeks, months, and quarters. The question is how high the stock might climb and where the resistance points are located. The resistance points are critical for long-term investors to consider, as they represent regions where profit-taking and/or other market dynamics may lead to consolidations or price corrections, AKA opportunities to build on this position.
Results, Analysts, and Institutions Indicate Improving Market Dynamics for PLAY Stock
Reasons to build on this position include its growth trajectory, which implies a return to sustainable growth as soon as the current quarter, and its ability to buy back shares. Repurchase activity in Q3 and year-to-date resulted in a nearly 12% reduction in share count, a significant gain for investors. The only bad news is that Q3 was a net loss, but the loss is offset by reinvestment in the turnaround plan and balance sheet health. The company remains well-capitalized and lightly leveraged, positioning it to continue its plans and provide value to its shareholders.
The analysts’ response to the news is tepid but otherwise favorable to investors. MarketBeat tracked only three revisions within the first few days, including a reaffirmed target, a set target, and a target reduction. However, the takeaway is that the reduced target and consensus on fresh targets lead to an above-consensus price point, implying at least a 15% upside from mid-December’s critical resistance point, the 150-day exponential moving average. The 150-day EMA is a significant pivot, signaling a shift in market dynamics from distribution to accumulation when crossed.
The institutional data aligns with such a shift. The institutions are the dominant force in this market, owning more than 90% of the stock, and sold in Q2 and Q3, then reverted to buying in early Q4. The Q4 trend is likely to remain intact, given the results and outlook improvement, and could strengthen over time. As it stands, the group provides a robust tailwind, buying at a pace of $3 for each $1 sold in the quarter’s first eight weeks.
Dave & Buster’s Weak Quarter Overlooked in Favor of Sequential Improvements
Dave & Buster’s didn’t have a strong quarter, with revenue of $448.2 million falling by 1.1% year-over-year and missing the consensus estimate. However, the miss is slim and offset by operational improvements that reduced operating costs in both core segments and by sequential monthly traffic improvements throughout the quarter.
The good news is that margin improvement will accelerate earnings recovery in upcoming quarters; the bad news is that business spending cuts into the gains, resulting in a larger-than-expected quarterly loss. Even so, the top- and bottom-line misses are slim, the company remains in a healthy condition, and traction is expected to improve as turnaround efforts accelerate. The analyst forecasts, which are likely to be low, expect a 5% revenue gain in the subsequent fiscal year and for earnings to grow by 100%.