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Dave & Buster's Stock: Is Now the Time to Make a PLAY?
Written by Thomas Hughes. Published 9/17/2025.
Key Points
- Dave & Buster's turnaround gains traction with the hiring of new CEO Tarun Lal.
- The business is financially sound with the balance sheet bolstered by sale-leaseback transactions.
- Sell-side trends suggest the downtrend is coming to an end, and the 2025 buying opportunity will soon disappear.
Dave & Buster's (NASDAQ: PLAY) fiscal Q2 earnings report was underwhelming, with tepid revenue growth and a notable earnings contraction.
However, the report underscores the company's strengths and improved recovery potential. Dave & Buster's has appointed Tarun Lal—a 25-year KFC veteran—as its new CEO.
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Lal's tenure at KFC covered all facets of U.S. operations, providing a solid foundation for leading Dave & Buster's through its ongoing turnaround—a process marked by both risks and opportunities.
A CEO aligned with company priorities can accelerate the turnaround and deliver shareholder value sooner rather than later.
Dave & Buster's Crashes on Weak Results: Floor in Sight
Dave & Buster's Q2 results revealed significant margin compression, starting at the gross level and intensifying at the operating level. This pressure stemmed from higher input and operating costs, new store openings, and its turnaround initiatives, which aim to rectify missteps by the previous leadership.
Crucially, many of these costs should taper off over time, while others may yield returns through higher employee and customer satisfaction—ultimately boosting revenue and earnings.
The good news: Dave & Buster's Entertainment returned to growth in Q2. Though modest at just 0.05%—100 basis points below MarketBeat's consensus—this marks the end of several quarters of contraction and sets the stage for stronger acceleration in Q3.
Importantly, the company's operational performance remained robust enough to sustain financial health while reinvesting and repurchasing shares. Although buybacks slowed year-over-year, they still amounted to nearly 3% of market cap for the quarter, reducing the share count by roughly 14% compared to last year.
Dave & Buster's balance sheet remains solid. The company has fortified its cash position through a sale-leaseback program, enabling aggressive share repurchases. As of Q2, cash, current assets, and total assets increased, only partially offset by higher debt and liabilities.
The net outcome: a 14% rise in shareholder equity despite substantial share count reduction, with further gains anticipated as the year unfolds.
Looking ahead, more sale-leasebacks are expected, and store count will expand, enhancing leverage for the business rebound. The company aims to open 11 new outlets by 2025, including international locations—a key driver for long-term growth.
While international operations still account for a small share of total outlets, they are expected to expand over time and sustain mid-to-high single-digit growth.
Sell-Side Interest Pushes PLAY to Its Floor
Sell-side activity has weighed on PLAY shares over the past 18 months. However, with short interest rapidly declining, institutional ownership remaining above 90%, and analysts identifying a bottom, the downtrend is nearing its end.
In the hours after the report, two analysts revised down their price targets to near long-term lows but maintained Hold ratings in line with consensus. No analyst currently rates the restaurant stock as a Sell.
PLAY's price action isn't overtly bullish but indicates a floor near its COVID-19 low around $17—a level unlikely to break absent significant business deterioration.
The likely scenario is that PLAY will remain under pressure, trending sideways within its established range until subsequent earnings reports reflect the impact of its turnaround and growth efforts.
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