Ricardo Pillai
2 min read
In This Article:
We came across a bullish thesis on Dave & Buster’s Entertainment, Inc. (PLAY) on Twitter by marginofdanger. In this article, we will summarize the bulls’ thesis on PLAY. Dave & Buster’s Entertainment, Inc. (PLAY)'s share was trading at $21.54 as of May 20th. PLAY’s trailing and forward P/E were 14.75 and 9.05 respectively according to Yahoo Finance.
Pixabay/Public Domain
Dave & Buster’s Entertainment (PLAY) presents a compelling deep value opportunity, currently trading at just $17 per share—its IPO price from over a decade ago—despite generating nearly three times the EBITDA it did then. The company operates two distinct yet synergistic entertainment businesses: Dave & Buster’s (arcades) and Main Event (bowling and family entertainment). Main Event was acquired for around $800 million and is likely still worth at least that today, especially when compared to publicly traded peer Bowlero (BOWL), which commands a higher valuation.
At today’s stock price, the legacy arcade business is effectively being valued at just 2x EBITDA. Hill Path Capital, a major shareholder with roughly 20% ownership and two board seats, recently led a management overhaul, ousting the former CEO following strategic missteps—most notably, overspending on store remodels (over $500 million in capex last year) and pulling back on national advertising. The new leadership is returning to fundamentals, slashing capex to $220 million and aggressively repurchasing shares. Several board members, including the chairman, bought shares in the $25–$30 range in December, signaling confidence, while Hill Path notably did not sell any shares even when the stock reached $40–$60 last year. Though highly leveraged, the debt is long-dated and covenant-lite, mitigating near-term risk. With significant insider ownership, operational changes underway, and the stock trading at distressed levels relative to historical and peer valuations, PLAY offers an asymmetric risk/reward profile. Check out Lucky Strike (LUCK), another player in the bowling industry.
Dave & Buster’s Entertainment, Inc. (PLAY) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held PLAY at the end of the fourth quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of PLAY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
