This Insider Isn’t PLAYing Around

Photo by NATHAN MULLET on Unsplash

We couldn’t stick with our recent theme of insider change of heart buys. It’s been our focus for the past few weeks but there wasn’t an executive that sold, sold, sold and suddenly bought on this week’s roster of trades.

So, we’ll move to another “C” in our insider trading acronym of 3C&P, Change of heart, cluster, commitment, and past performance. Commitment is this week’s “C”. Maybe we should use the word comma instead because we measure commitment by the amount of dollars, the more commas the better.

Dave & Buster’s Entertainment, Inc. (PLAY) and new Chief Executive Officer (CEO) Christopher D. Morris made a two comma buy. On July 13, 2022, the CEO bought 33,400 of the entertainment company’s stock at $30.54 for a total investment of $1,020,100. (1) The seven-figure acquisition lifted his stake of Dave & Buster’s shares to 48,206. Morris took over the tile of CEO after PLAY acquired rival Main Event
in April. (2) Prior to last week’s buy, Morris’ only PLAY transactions were options related. Dave & Buster’s operates 145 venues in North America that combine entertainment and dining and offer customers the opportunity to “Eat Drink Play and Watch,” all in one location. Dave & Buster’s offers a full menu of entrées and appetizers, a complete selection of alcoholic and non-alcoholic beverages, and an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events.

Main Event operates 50 centers in 17 states across the country. Main Event offers the most fun under one roof with food, drinks, pool, state-of-the-art bowling, laser tag, hundreds of arcade games and virtual reality.

Management says the combined companies are expected to generate approximately $1.933 billion in revenue for 2022. (3) As it stands now, Wall Street’s consensus revenue target for the year is $1.7 billion. (4) That means there could be room for analysts to increase their forecasts, which usually is a positive for the stock price.

In the last five-years, PLAY traded at an average of 1.69 times sales. Today, Dave & Buster’s price to sales ratio stands at 1.06 compared to 1.4 for its sector average. If the combined companies hit management’s 2022 guidance, we can arrive at the following potential price targets.

    • Current PLAY P/S: $41.88
    • 5-year average PLAY P/S: $66.73
    • Sector Average P/S: $55.31

As we type, Dave & Buster’s trades at $31.94 with a one-year price target of $53.44, (5) in line with the sector P/E possible price target. OVERALL: Dave & Buster’s Entertainment, Inc. (PLAY) appears to offer CEO Christopher D. Morris and shareholders attractive upside from Morris’ purchase and its current price. With a five-year beta of 1.8 (6), PLAY is considered considerably more volatile than the S&P 500 and is only appropriate for investors with well above average risk tolerance and a time horizon of at least 12-months.

Rich Meyers
Investing Trends

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