Despite a serious drop after third quarter earnings, many experts are still touting Dave & Buster's (PLAY) position in the growing experiential economy.
Shares opened down just under 10% on Wednesday, reflecting disappointing sales figures and muddled company strategy that fell victim to what management called sales "cannibalization".
However, the longer-term trend of experience-based restaurant and shopping that younger generations crave is buoying analyst confidence in the stock.
"[Dave & Buster's has] a unique positioning as a destination restaurant and entertainment experience," Jefferies analyst Andy Barish said in his Long View take. "We believe PLAY can outperform other full-service concepts and drive multiple expansion as it proves itself as a differentiated growth concept."
Experiences Top Millennial Expenditure
First, the experiential economy is worth elucidating.
The Harvard Business Review explains that economists are now beginning to separate services from experiences in a way that was never outlined before.
"Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them," the report states.
Maybe no restaurant is better positioned to seize on that shift than Dave & Buster's, making it a key play.
The opportunity becomes more enticing based upon the growth projected for experiential "shoppertainment" and restaurant experiences in younger generations.
According to Eventbrite (EB) , a San Francisco-based management and ticketing website, millennials and younger generations much prefer spending on things to do rather than things themselves.
"When it comes to money, experiences trump things," a report from the company reads. "More than 3 in 4 millennials (78%) would choose to spend money on a desirable experience or event over buying something desirable, and 55% of millennials say they're spending more on events and live experiences than ever before."
Therefore, as millennials, which stand to control $1.3 trillion in consumer spending power in the coming years, choose their restaurants and shopping locales of choice, Dave & Buster's could be a big winner.
Buying for a Bounce?
In the current market, buying on an earnings dip is not always the wisest move. As has been shown countless times into the back end of the year, stocks that come down are not certain to come back up any time soon.
For Dave & Buster's, Real Money's technical analyst Bruce Kamich argued that a "retest of the April-May lows around $42-$38 would not be a big surprise in the months ahead."
Still, the confidence in the company's business model is consistent for the long term even if finding an entry point remains shaky.
"We continue to recommend purchase of PLAY and highlight it as one of our favorite names for 2019 as we project that comps will return to positive territory in 4Q, new store performance remains strong and valuation is attractive," Loop Capital managing director Lynne Collier wrote.
Collier issued a $70 price target for the stock based on the bullish outlook into coming years.
Each analyst polled by FactSet has retained a "Buy" rating even after the earnings release, with a consensus price target of $65.20, nearly $20 north of Wednesday's opening price.
For investors in-line with that longer term view, Wednesday's dip could end up being a good time to play PLAY.