On Wednesday, Raymond (NS:RYMD) James reiterated a Market Perform rating on Dave & Buster's Entertainment Inc. (NASDAQ:PLAY), following the company's third-quarter results, which fell slightly short of expectations. The company's comparable sales continued to face challenges, marking the seventh consecutive quarter of negative performance.
Dave & Buster's reported that the average sales lift from its remodeling efforts has moderated, a trend management attributes to an awareness issue they are currently addressing. Additionally, the unexpected resignation of CEO Chris Morris, who joined during the Main Event acquisition, has contributed to the uncertainty surrounding the company's direction. Despite this change in leadership, the company has affirmed its commitment to its strategic plan.
The financial health of Dave & Buster's is under scrutiny as well, with the company's balance sheet and free cash flow metrics showing signs of pressure. The debt-to-EBITDA ratio stands at approximately three times, and free cash flow is negative due to significant capital expenditures allocated for new unit development and remodeling projects.
In after-hours trading, shares of Dave & Buster's appeared to decline by roughly 10%. Analysts suggest that the stock's low valuation, with a 2025 enterprise value to EBITDA in the mid-5s, may offer some downside protection, assuming the company can stabilize its comparable sales figures going into 2025.
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