Dave & Buster’s Inc. shares jumped 6.5% in Wednesday trading after the company announced that Chief Executive Brian Jenkins would retire next week — a move that Truist analysts say transitions the company into a new phase of its COVID recovery.
“[W]e view the transition to a new CEO as a sign that Dave & Buster’s is shifting its focus from defense (stopping the bleeding from incremental competition pre-COVID and then survival during COVID) to offense (driving traffic through innovation in amusements and ‘watch’ assets),” wrote analysts led by Jake Bartlett.
While Truist says Jenkins was a good choice, having served as chief financial officer from 2006 through Aug. 2018 before becoming CEO, the company is looking for something different now.
Board Chair Kevin Sheehan will serve as interim CEO.
“We believe that Dave & Buster’s board and interim CEO, Kevin Sheehan, are looking for a CEO to drive innovation necessary to grow traffic, leverage ‘watch assets’ and better defend market share as incremental competition ramps back up,” analysts said.
Truist rates Dave & Buster’s
stock buy with with a $56 price target.
Raymond James notes that Jenkins isn’t leaving after a dispute, but is stepping down after reporting record second-quarter revenue.
“Despite the company’s strong business recovery, Dave & Buster’s shares continue to trade at a compelling valuation in our view (2022 EV/EBITDA sub-6x), noting that activist investor Hill Path continues to own over 9% of the company’s shares outstanding (as of June 30),” analysts wrote.
Raymond James rates Dave & Buster’s stock a strong buy.
Stifel analysts rate Dave & Buster’s stock a hold, noting the unpredictability of the ongoing pandemic.
“With increased uncertainty around the persistence of COVID cases post-vaccine and commensurate changes in consumer behavior or operating restrictions, we believe the sales recovery may not maintain its recent pace,” analysts said.
“We believe the current valuation adequately reflects this uncertainty.”
Stifel has a $40 price target on Dave & Buster’s shares.
Dave & Buster’s stock has run up 27.4% for the year to date while the S&P 500 index
has gained 17.2% for the period.