It's been a sad week for Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), who've watched their investment drop 12% to US$11.49 in the week since the company reported its annual result. The result was positive overall - although revenues of US$1.4b were in line with what the analysts predicted, Dave & Buster's Entertainment surprised by delivering a statutory profit of US$2.94 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the ten analysts covering Dave & Buster's Entertainment provided consensus estimates of US$737.1m revenue in 2021, which would reflect a concerning 46% decline on its sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$3.46 per share in 2021. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.39b and earnings per share (EPS) of US$2.42 in 2021. So we can see that the consensus has become notably more bearish on Dave & Buster's Entertainment's outlook following these results, with a large cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous calls for a profit.
The average price target fell 52% to US$15.59, implicitly signalling that lower earnings per share are a leading indicator for Dave & Buster's Entertainment's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Dave & Buster's Entertainment analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$4.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 46%, a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.3% next year. It's pretty clear that Dave & Buster's Entertainment's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Dave & Buster's Entertainment to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Dave & Buster's Entertainment going out to 2024, and you can see them free on our platform here..
Before you take the next step you should know about the 3 warning signs for Dave & Buster's Entertainment (1 is significant!) that we have uncovered.
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