An Insider PLAY For Your Watchlist

Photo by NATHAN MULLET on Unsplash

The was not a lot to pick from last week’s roster of insider buys and the stock market remains in a crappy position. Once again, we are resigned to adding companies to our rebound watchlist and not willing to commit to anything beyond that.

This week, our insider buy candidate had the most reasons for making our list. A cluster of insiders (at least two) bought and showed commitment based on dollars spent. A pair of C-Suite insiders and a major shareholder purchased Dave & Buster’s Entertainment, Inc. (PLAY) last week.

Chief Procurement Officer Les Lehner bought 12,154 shares at $32.81, spending $398,741. Chief Financial Officer (CFO) Michael Quartieri acquired 5,000 shares at $31.73 for $158,633. And Scott Ross, whose Hill Path Capital owns more than 10% of PLAY stock, purchased another 600,000 shares at $32.29, committing $19,373,760 more. (1)

Dave & Buster’s Entertainment owns and operates entertainment and dining venues for adults and families in North America. Its venues offer a menu of entrées and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. As of January 30, 2022, it owned and operated 144 stores located in 40 states, Puerto Rico, and one Canadian Province.

The trio of insiders made their buys as PLAY was flirting with its 52-week low of $29.60. The entertainment company has been as high as $52.53 in the last year. Wall Street currently puts a consensus one-year price target of $52 on the stock. (2) It trades at $33.41 as we type.

Like most everything under current market conditions, Dave & Buster’s is likely to be caught in the tide of the overall market’s direction. The NASDAQ recently broke key support and could be headed lower in the weeks to come. If so, PLAY would likely follow the trend and possibly set a new yearly low, which is why we’d prefer to put Dave & Buster’s on our watchlist for now.

Longer term, analysts forecast major earnings growth in fiscal 2024 (next year). This year’s consensus earnings estimate is $2.75 per share (EPS) versus $2.21 last year. Next year, Wall Street sees profits rising to $3.67 per share, a 33% increase. Sales are also forecasted to march higher next year, rising to $2.32 billion from $1.93 billion, a 20.5% increase. (3)

In the last half-decade, PLAY traded with an average price to earnings (P/E) ratio of 21.24 and at an average of 1.65 times sales (P/S). If we apply both valuations to Wall Street’s fiscal ’24 estimates for the top and bottom lines, we calculate potential price targets of $77.95 and $79.29, for P/E and P/S respectively.

OVERALL: Dave & Buster’s Entertainment, Inc. (PLAY) appears to offer attractive upside based on Wall Street’s fiscal 2024 outlook and the restaurant’s recent valuation history. Would-be investors might consider adding PLAY to their watchlist of companies to consider when the selling stops.

With a beta of 1.8 (S&P 500’s beta is 1), Dave & Buster’s is considerably more volatile than the S&P 500 and only appropriate for aggressive investors with a time horizon of at least 18 months.


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