On Wednesday, BMO Capital Markets adjusted its outlook for Dave & Buster's Entertainment Inc. (NASDAQ:PLAY), raising the entertainment and dining venue's price target to $75 from the previous $60 while maintaining an Outperform rating.
The revision follows Dave & Buster's reported earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fourth fiscal quarter of 2023, which surpassed consensus estimates by $6 million. The company achieved an EBITDA of $152 million, primarily driven by robust restaurant margins that helped to mitigate weaker comparable store sales.
Dave & Buster's did not release financial guidance for fiscal year 2024, instead reiterating its goal of reaching an EBITDA of $1 billion in the upcoming years. BMO Capital's decision to upgrade the price target is based on increased EBITDA projections for FY24, the introduction of FY25 estimates, and a shift in valuation methodology to FY25, applying a multiple range of 6.5 to 7.0 times EBITDA.
The firm expressed optimism about Dave & Buster's sales initiatives and the company's ongoing self-help strategies. These efforts are seen as pivotal in driving EBITDA growth and providing a pathway to leverage Dave & Buster's discretionary business model more effectively in the future.
BMO Capital highlighted the company's potential to navigate through a less favorable environment for discretionary spending. According to the firm, Dave & Buster's is on a solid trajectory to enhance its financial performance and achieve its long-term EBITDA target, which bodes well for the company's investment outlook.
InvestingPro Insights
As Dave & Buster's Entertainment Inc. (NASDAQ:PLAY) continues to impress with its robust EBITDA performance, it's essential to consider additional metrics that provide a deeper financial perspective. According to InvestingPro data, the company has a market capitalization of $2.49 billion and is trading at a P/E ratio of 21.56. This valuation reflects a premium compared to its adjusted P/E ratio for the last twelve months as of Q3 2024, which stands at 16.41, suggesting a more favorable earnings outlook in the near term.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, the company has shown a high return over the last year with a 72.07% increase in total price return. Additionally, the recent three-month performance has been strong, with a 20.71% return, indicating a positive short-term trend. It's important to note that Dave & Buster's does not currently pay a dividend, which may influence investment decisions for those seeking income-generating stocks.
For those interested in a deeper dive into Dave & Buster's financial health and future prospects, there are additional InvestingPro Tips available. By signing up for a subscription, investors can access these insights and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are over 10 additional InvestingPro Tips that can further guide investment strategies for Dave & Buster's.
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