Dave & Buster's Stock Played Out Ahead of Earnings

The equity just breached a recently supportive technical level, too

Deputy Editor
Jun 11, 2020 at 3:25 PM
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Dave & Buster's Entertainment Inc (NASDAQ:PLAY) is in hot water ahead of its first-quarter earnings report, due out after the close this evening. The stock is down 15.02% at $14.71 this afternoon, pacing for its third consecutive win. On top of that, the equity is eyeing its first close south of the technically supportive 10-day moving average, and is heading towards its worst week since early April -- down over 20% since Monday. For the year, PLAY is down 63.2%. 

This pre-earnings price action is driving options bears out in droves. While the 17,000 calls traded so far are outnumbering puts on an overall basis, these bearish bets are crossing the tape at three times their average pace. The most popular contract, by far, is the weekly 6/12 13-strike put, where positions are being opened. This suggests that these traders are banking on more downside for PLAY before the contract expires this Friday. 

This penchant for bearish bets is out of the norm for PLAY, which sports a 10-day call/put volume ratio of 3.9 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 74th percentile of its annual range, suggesting a healthier-than-usual appetite for long calls of late. 

Analysts have been much more pessimistic, with just one in coverage calling PLAY a "strong buy," while 10 say "hold." Plus, the consensus 12-month price target of $14.65 is a slim 0.21% discount to current levels. 

A look back shows Dave & Buster's stock finishing higher the day after earnings just half the time during the past two years. During this time period, the stock averaged a next-day return of 8.7%, regardless of direction, which is much smaller than the 23.9% post-earnings swing the options pits are pricing in this time around. 

 

 

 

 

 

 

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