Summary
- Dave & Buster's continues to languish.
- Investors are worried about comparable sales, but they are missing the long game.
- The company has industry-leading margins and volumes, and it is very cheap today; the stock is a Buy.
(Source: Investor presentation)
Dave & Buster’s (PLAY) has long been an attractive stock to me because of its highly differentiated model. The company’s game sales not only set it apart from other restaurants, but its margins are much better because of those sales as well. Dave & Buster’s has a long history of impressive growth, and I think the market is ignoring its future potential. The stock looks like a Strong Buy at $41.
A differentiated model with room to run
Dave & Buster’s has grown at double-digit rates for years. The company has aggressively expanded its footprint in the US, as it has leveraged the impressive profits its stores produce to fund its store expansion efforts.
(Source: Investor presentation)
Today, the company has 133 stores across mostly the eastern half of the US. With 15 new stores in this fiscal year, and a history of opening up new stores at a 10%+ annual rate, I see store expansion as a key growth driver in the coming years.
With only 133 stores, there is still plenty of room for Dave & Buster’s to expand for years to come, particularly in markets like Washington, Oregon, and California, where its current penetration is quite low. There are sizable portions of the country with little or no presence from Dave & Buster’s, so this is a long-term growth story.
