Dave & Buster's Stock Pops After Jefferies Upgrade

CAKE sports attractively priced premiums at the moment

Assistant Editor
Sep 24, 2021 at 10:11 AM
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The shares of Dave & Buster's Entertainment Inc (NASDAQ:PLAY) are up 4.4% at $41.61 this morning, following a bull note from Jefferies. The firm upgraded the stock to "buy" from "hold" and raised its price target to $56 from $40, noting cost savings during the Covid-19 pandemic, and the driving of sales beyond 2019 levels thanks to its strong brand. In addition, the progress of vaccination efforts has helped ease concerns around full-service dining.

There's reason to believe that more upgrades could be on the horizon, as Jefferies joins a split brokerage bunch. Heading into today, five analysts called Dave & Buster's stock a "strong buy," while five called it a "hold" or worse. Meanwhile, the 12-month consensus price target of $50 is an 18.5% premium to current levels.

Short sellers have already been hitting the exits, though the stock still looks primed for a short squeeze. Short interest is down 12.4% in the most recent reporting period, yet the 6.17 million shares sold short make up 15.8% of the equity's available float, or nearly a week's worth of pent-up buying power.

Options traders, meanwhile, have been extremely bullish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Dave & Buster's stock sports a 10-day call/put volume ratio of 4.52, which sits higher than 90% of readings in its annual range. This means calls have been picked up at a quicker-than-usual rate in the last two weeks.

What's more, PLAY options can still be had for a bargain. This is per the security's Schaeffer's Volatility Index (SVI) of 52%, which stands higher than just 9% of readings from the past 12 months, indicating options traders are pricing in relatively low volatility expectations for Dave & Buster's stock at the moment. 

On the charts, the security is now pacing to log a close above the $40 level for the first time since July 1. And while the 80-day moving average thwarted an attempt to breach the $39 mark earlier this month, PLAY is now trading well above this trendline. Longer term, Dave & Buster's stock is up 164.6% year-over-year.

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