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Canaccord Says Buy The Pullback In Dave & Buster's Shares

Shares of Dave & Buster's Entertainment, Inc. PLAY 2.59% were trading lower by more than 3 percent after the company's second quarter earnings per share came in above the Street's estimates but its 1 percent comp gain fell short of the 2.1 percent the Street was looking for.

  • Lynne Collier of Canaccord Genuity commented in a report that the comps not only fell short of the Street's expectations, but slowed quarter-over-quarter given the following headwinds: Memorial Day holiday shift
  • Slowing trends in the overall casual dining sector
  • The quarter also happened to be the toughest lap of the year
  • Cannibalization

However, Collier suggested that Dave & Buster's setup for the bottom half of 2016 is "attractive" as cannibalization rates are expected to moderate, year-over-year comparisons "materially" eases and advertising spend will rise. As such, the analyst remains confident the company can realize a same-store sales growth of 2.5 percent and 4.1 percent in the third and fourth quarter, respectively.

Collier added that the weakness seen in Wednesday's session should be viewed as a "buying opportunity for long-term investors" as the bullish thesis remains unchanged. Specifically, the company still holds a differentiated positioning with a strong appeal to millennials, a long runway for unit growth ahead, a best-in-class unit economics and the potential for accelerating same-store sales.

Shares remain Buy rated with an unchanged $52 price target.

Aug 2016Canaccord GenuityInitiates Coverage onBuy
Jul 2016Stifel NicolausDowngradesBuyHold
Sep 2015StifelMaintainsBuy

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