1. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
Analysts’ Upside Potential: 56.48%
Number of Hedge Funds: 28
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) operates entertainment and dining venues across North America. They combine restaurants and arcades in one place, allowing guests to enjoy meals while playing games. The company has around 223 venues, including about 164 Dave & Buster’s locations in the US, Puerto Rico, and Canada, as well as, 59 Main Event venues that offer additional activities like bowling and laser tag.
During the latest quarter, Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) made notable advancements toward its long-term strategic objectives, despite facing some challenges. Management opened three new stores, which are expected to yield strong returns based on historical performance. This brings the total to ten new stores opened on a year-to-date. Moreover, its remodeled stores are proving helpful in attracting traffic and sales. The company remodeled eleven locations during the quarter with plans to complete a total of 44 by the end of fiscal 2024.
However, despite these positive developments total revenue decreased by 3% year-over-year, totaling $453 million. Comparable store sales also fell by 7.7% during this period. Management attributed the decline to adverse weather and ongoing remodels disrupting operations. The company aims to open four more stores (three Dave & Buster’s and one Main Event) by the end of this fiscal year, with an international franchise store planned in Bengaluru, India.
Patient Capital Management stated the following regarding Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) in its Q3 2024 investor letter:
“We started a position in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) during the quarter, a leading dining and entertainment venue in the United States. Founded in 1982 in Dallas, Texas the company has expended to over 200 venues in North America across two brands (Dave & Busters, and Main Event). The company is in the middle of a multi-year transformation focused on reinvigorating growth through store remodels, store expansions, and technology upgrades while improving the margin profile of the business through cost optimizations and synergies. All the hard work has not shown up in the numbers yet as the macro environment continues to weigh on consumer expenditures. As the company continues to deliver against their plan, we believe the effort will lead to a drastically improved business model as consumer spending returns. In the meantime, the company continues to return cash to shareholders buying back 19% of shares since 2023.”
While we acknowledge the potential of Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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