Dave & Buster's Stock Rockets Higher on Guidance Boost

PLAY short sellers could be feeling the heat

Deputy Editor
Jan 15, 2019 at 10:01 AM
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The shares of Dave & Buster's Entertainment Inc (NASDAQ:PLAY) are up 4.5% at $53.05 in early trading, on upped guidance from the entertainment concern. Specifically, the company raised its full-year sales and net income forecasts.

PLAY stock has been attempting a rebound, after a mid-December bear gap led the shares to shed 32.7% last quarter -- their worst ever. The equity is up 19% so far this year, and has since closed that gap. PLAY is now set to top its 80-day moving average for the first time since early November. 

Analysts are banking on a Dave & Buster's rebound, too. Of the 10 following the stock, nine analysts give PLAY a "strong buy" rating, with the other doling out a "buy."  In fact, following the company's guidance, Loop Capital Markets said, "we remain buyers of the stock," waxing optimistic on same-store sales and new store performance.

Short sellers, however, have not shared this sunny outlook and could be feeling some pressure. Currently, the 4.86 million shares sold short make up 12.7% of PLAY's available float. It would take over a week for traders to buy back these bearish bets, at the equity's average pace of trading -- which could spur even more tailwinds for Dave & Buster's stock. 

Lastly, PLAY's Schaeffer's Volatility Index (SVI) of 40% stands higher than just 21% of all other readings from the past year, indicating near-term contracts are pricing in relatively low volatility expectations at the moment. In other words, short-term options are attractively priced on the shares right now.

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