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Dave & Buster's (PLAY - Free Report) and its arcade driven fun may be a thing of the past as society's new normal pushes away from crowded entertainment centers. In the post-COVID world, I believe consumers will still avoid places where you are playing (and touching) a game seconds before stuff your face with curly fries (as incredible as that sounds). Analysts have been getting increasingly pessimistic about PLAY's EPS estimates in the coming years, pushing the stock into a Zacks Rank #5 (Strong Sell).
Dave & Buster's was one of the hardest-hit enterprises during the pandemic, with sales declines of nearly 70% in the past 3 quarters and a bottom-line that flipped into deep negative territory. PLAY went from $47+ per share on February 21st to $4.61 on March 18th, losing over 90% of its value in less than a month's time.
PLAY has actually had a pretty remarkable recovery since it bottomed, driving up as high as $35.99 a share on Tuesday. The stock is up 95% in the past 3 months, and 680% from its low. I think this stock has surged past its intrinsic value in this recovery mania, and it may be time to pull profits.
A Post-Pandemic World
It is probably hard to imagine a thriving economy where all the restaurants and bars are open to cram as many customers as they can fit into their space. Where concert halls and stadiums are filled to the brim with people, and the fear of a microscopic terror is no longer at the forefront of everyone's mind.
This pandemic will forever scar our society. Demand for hand sanitizer and face masks will go well past a "herd immunity" to COVID-19. The post-pandemic world will be a much more germophobic one than the one we left behind in 2019.
It's been 1 year since the first confirmed COVID case in the US, and this viral invasion has completely changed the way the world operates, with global economies digitalizing and social distancing becoming the standard. The New Normal is not just some buzz word that media outlets are trying to sell, but it is a real shift in consumer habits that businesses will have to adapt to.
Dave & Busters In the New Normal
As of now, I do not believe that D&B's arcade/restaurant structure will drive the needed demand for growth. The business had already been facing major margin contractions for a couple of years now as the business works to stay relevant in a space that appears to be mature to declining already.
D&B's latest press release on January 11th announced it has $289 million in liquidity with $12 million in cash in the books and $277 million available revolving debt. The company said its current cash burn rate was $3.7 million per week, which means that PLAY has 18-months of runway to get its operations on track.
The business will likely not go belly up for some time, but I wouldn't be surprised if the company were to downsize some of its underperforming locations this year. I believe that the systemic changes in social needs and demands will veer consumers away from crowded arcade/restaurants where you touch everything then put your hand in a basket of wings.
Unless D&B can make some significant systemic changes in its structure that would better cater to the New Normal, I don't see much growth in this enterprise's future. I am not recommending that you short-sell this stock, but I would consider pulling profits at this point in time if you are holding shares.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Bear Of The Day: Dave & Buster's (PLAY)
Dave & Buster's (PLAY - Free Report) and its arcade driven fun may be a thing of the past as society's new normal pushes away from crowded entertainment centers. In the post-COVID world, I believe consumers will still avoid places where you are playing (and touching) a game seconds before stuff your face with curly fries (as incredible as that sounds). Analysts have been getting increasingly pessimistic about PLAY's EPS estimates in the coming years, pushing the stock into a Zacks Rank #5 (Strong Sell).
Dave & Buster's was one of the hardest-hit enterprises during the pandemic, with sales declines of nearly 70% in the past 3 quarters and a bottom-line that flipped into deep negative territory. PLAY went from $47+ per share on February 21st to $4.61 on March 18th, losing over 90% of its value in less than a month's time.
PLAY has actually had a pretty remarkable recovery since it bottomed, driving up as high as $35.99 a share on Tuesday. The stock is up 95% in the past 3 months, and 680% from its low. I think this stock has surged past its intrinsic value in this recovery mania, and it may be time to pull profits.
A Post-Pandemic World
It is probably hard to imagine a thriving economy where all the restaurants and bars are open to cram as many customers as they can fit into their space. Where concert halls and stadiums are filled to the brim with people, and the fear of a microscopic terror is no longer at the forefront of everyone's mind.
This pandemic will forever scar our society. Demand for hand sanitizer and face masks will go well past a "herd immunity" to COVID-19. The post-pandemic world will be a much more germophobic one than the one we left behind in 2019.
It's been 1 year since the first confirmed COVID case in the US, and this viral invasion has completely changed the way the world operates, with global economies digitalizing and social distancing becoming the standard. The New Normal is not just some buzz word that media outlets are trying to sell, but it is a real shift in consumer habits that businesses will have to adapt to.
Dave & Busters In the New Normal
As of now, I do not believe that D&B's arcade/restaurant structure will drive the needed demand for growth. The business had already been facing major margin contractions for a couple of years now as the business works to stay relevant in a space that appears to be mature to declining already.
D&B's latest press release on January 11th announced it has $289 million in liquidity with $12 million in cash in the books and $277 million available revolving debt. The company said its current cash burn rate was $3.7 million per week, which means that PLAY has 18-months of runway to get its operations on track.
The business will likely not go belly up for some time, but I wouldn't be surprised if the company were to downsize some of its underperforming locations this year. I believe that the systemic changes in social needs and demands will veer consumers away from crowded arcade/restaurants where you touch everything then put your hand in a basket of wings.
Unless D&B can make some significant systemic changes in its structure that would better cater to the New Normal, I don't see much growth in this enterprise's future. I am not recommending that you short-sell this stock, but I would consider pulling profits at this point in time if you are holding shares.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>