UBS Cuts Price Target After Dave & Buster’s Q2 Miss

Dave & Buster’s shares tumbled 13.6% in premarket trading after the entertainment chain reported fiscal second-quarter results that missed Wall Street estimates and after UBS cut its price target to $9 from $12 while maintaining a Neutral rating. The stock has fallen more than 50% year to date.

Revenue for the quarter declined 2.4% to $544.1 million, below analysts’ estimates of $556.8 million. Entertainment-related revenue dropped nearly 9% to $332.6 million. The company posted a net loss of $12.5 million, or $0.36 per share, versus a year-earlier profit of $11.4 million, or $0.32 per share. On an adjusted basis, Dave & Buster’s reported a loss of $0.27 per share compared with forecasts for earnings of $0.18 per share.

Same-store sales fell 2.9%, slightly better than the 3.4% decline analysts had expected. Locations that have been remodeled outperformed the broader system. Management said adjusted free cash flow turned positive year-to-date, driven by lower capital spending and stronger cash generation, giving the company some flexibility to invest in the business.

Darin Harper, who became CEO last month, outlined a turnaround plan focused on improving the company’s core offering, strengthening marketing and delivering better value to guests. Harper said, “We are predominantly an occasion-based business with high awareness, but we have not consistently been the obvious answer when a guest is planning one of those occasions. Our value and execution have not been dependable enough.” The company added 10 new games and hired a chief marketing officer after operating more than a year without one.

Analysts remained cautious. UBS cited reduced earnings estimates and limited visibility into a recovery when it lowered its price target. Citizens maintained a Market Perform rating and StoneX kept a Hold, noting that gains in operating metrics had not yet translated into consolidated revenue or adjusted EBITDA growth. Citizens analyst Jordan Bender wrote that the CEO did not yet appear ready to make major structural changes, though execution could improve as initiatives are implemented. UBS analyst Dennis Geiger warned of greater-than-expected margin pressure, elevated macroeconomic risks and limited visibility into the turnaround.

Management highlighted that remodeled locations and recent game additions are performing well and said efforts to strengthen food and beverage, partnerships and collectibles are part of the recovery plan. Entertainment revenues remained weak, reflecting years of underinvestment in attractions and experiences. Management said it will continue to invest improved cash generation into the business to support the plan.