Bearish flow noted in Dave & Buster's with 4,865 puts trading, or 2x expected. Most active are Jul-20 9 puts and Aug-20 2.5 puts, with total volume in those strikes near 950 contracts. The Put/Call Ratio is 1.63, while ATM IV is up over 1 point on the day. Earnings are expected on September 8th.
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. General Motors (GM) upgraded to Buy from Neutral at Goldman Sachs with analyst Mark DeLaney saying the company is exposed to the solid position and improvement in U.S. and China, with opportunities to expand margins through "proactive" restructuring efforts and a mix shift towards pickups and SUVs. 2. Southwest (LUV) upgraded to Outperform from Neutral at Credit Suisse with analyst Jose Calado saying Southwest is not only a good way to invest in the near-term recovery in leisure travel demand, but is also his favorite multi year strategic investment with a best-in-class balance sheet that positions Southwest to stage an aggressive comeback. 3. Take-Two (TTWO) upgraded to Buy from Neutral at MKM Partners with analyst Eric Handler citing the company's Rockstar Studio announcement at Sony's (SNE) PS5 reveal event that a remastered version of Grand Theft Auto V would be released on the new console in 2021. 4. Dave & Buster's (PLAY) upgraded to Buy from Hold at SunTrust with analyst Jake Bartlett citing its Q1 results and its update on store reopening. 5. Sempra Energy (SRE) upgraded to Buy from Neutral at BofA with analyst Julien Dumoulin-Smith saying the company is among few peers to have affirmed FY20 guidance at the top end of the prior range with potential update from CA utilities through incremental capex. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
BMO Capital analyst Andrew Strelzik raised the firm's price target on Dave & Buster's to $15 from $13 and keeps a Market Perform rating on the shares. The company's Q1 earnings missed expectations due to impairments and lease terminations, though its early comp progression is benefiting from competition dynamics, the analyst tells investors in a research note. Strelzik adds that commentary from Dave & Buster's provides greater visibility into the company's potential road back to profitability, but its near term comp expectations still appear "overly optimistic".
As previously reported, SunTrust analyst Jake Bartlett upgraded Dave & Buster's to Buy from Hold with a price target of $22, up from $17, following its Q1 results and its update on store reopening. The analyst says he is encouraged by the faster than expected re-opening plans, the steadily improving sales at re-opened stores, and the company's new and "extremely flexible" operating model that can drive incremental profits at low volumes with potential long-term savings.
The company said, "As of March 20, 2020, all of the Company's 137 stores were temporarily closed for the remainder of the first quarter in compliance with state-by-state COVID-19 mitigation mandates to halt dine-in & entertainment operations, severely impacting the Company's first quarter results. In response, the Company took aggressive steps to conserve and attract new sources of capital in order to extend its liquidity horizon, while also preserving critical store re-opening capabilities. The Company began reopening stores on April 30 as individual states began easing dine-in & entertainment restrictions. As of last week, the Company had reopened 28 stores, and by the end of this week will have 48 stores open in 15 states under reduced hours of operation and capacity limitations as dictated by each locality. Each of the reopened stores has implemented extensive incremental cleaning and sanitation procedures, new seating and game configurations to promote social distancing, and a temporarily condensed food & beverage menu."
Reports Q1 revenue $159.81M, consensus $167.83M. Comparable store sales decreased 58.6% in Q1. Number of stores increased 8% to 137 from 127 in Q1. Brian Jenkins, Dave & Buster's CEO, said, "The negative effects of the COVID-19 pandemic are clearly evident in our first quarter results, during which we temporarily closed all of our stores for the final 6 weeks of the period. In response to these unprecedented challenges, our leadership team acted thoughtfully and decisively. First, we focused on extending the Company's liquidity horizon through aggressive cash conservation efforts and securing new equity capital. We then turned our attention to safely reopening stores, taking the opportunity to think differently about our operating model and to recalibrate our strategic initiatives. While still early and with many variables that are beyond our control, we are confident that we are taking the right steps to rebuild our business and emerge from this challenging time."
Pre-earnings options volume in Dave & Buster's is 2.1x normal with calls leading puts 6:5. Implied volatility suggests the market is anticipating a move near 23.9%, or $3.48, after results are released. Median move over the past eight quarters is 6.4%.