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The Ratings Game: Dave & Buster’s rang up less than one-third the revenue in 2020 compared with prior year

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Dave & Buster’s Entertainment Inc.
PLAY,
-5.91%

posted some shocking numbers in its fourth-quarter earnings report, demonstrating the severe toll COVID-19 has taken on the business.

Revenue for 2020 totaled $436.5 million, less than one-third the total of 2019, when it rang up $1.354 billion.

Comparable sales for the year plunged a whopping 70%.

However, the company says the fourth-quarter showed signs of momentum despite a surge in coronavirus cases over the holidays.

During the first eight weeks of the first quarter, total revenue was $150 million with comp sales down 47% compared to 2019.

See: ‘Plexiglass will stay up for a while’: Shoppers remain anxious about COVID but head back to stores

Fourth-quarter sales beat FactSet expectations.

By March 19, 2020, Dave & Buster’s had adopted a “poison pill” after a 90% drop in the stock over the previous month. Between March 14 and March 20, all of the company’s 137 locations were closed due to the coronavirus.

In September 2020, “going concern” language sent shares down again, this time more than 26%.

As of Jan. 31, 2021, 107 locations were operating, though they were doing so with reduced capacity and hours.

Now the company is putting a strategy in place that will include innovation in food and drink, including the rollout of high-speed ovens and exploring virtual kitchens, the latest entertainment, and enhanced engagement with customers through a new marketing and advertising program. The company is also considering a sports betting partnership that would bring fantasy sports and wagering to locations where the law allows them.

Also: Disney Plans to Reopen California Parks on April 30

And: Six Flags to reopen additional theme parks

Raymond James analysts said the “recovery is gaining steam quarter-to-date” in its latest note, maintaining its strong buy stock rating and $55 price target.

“In our opinion, shares will appreciate as the company demonstrates it can achieve profitability at lower sales volumes, reopen all of its stores by spring, and benefit from pent-up demand,” wrote Stifel analysts in a note.

Stifel rates Dave & Buster’s stock buy with a $54 price target, up from $50.

And Truist Securities raised its price target on Dave & Buster’s shares to $42 from $29, maintaining its hold stock rating.

Dave & Buster’s stock was down 4.4% in Thursday trading, but has rallied more than 326% over the past year.

The S&P 500 index
SPX,
+0.89%

has gained 62.2% over the last 12 months.

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