Dave & Buster’s stock plunges 26% on bankruptcy fears, but analysts say it’s investor ‘overreaction’ – MarketWatch

Dave & Buster's had to close all of its locations at one point, due to coronavirus Getty Images

Dave & Busters Inc. shares plunged 26.1% in Thursday trading after investors grew nervous about the possibility of the entertainment company filing for bankruptcy.

Dave & Busters PLAY, -26.13% included going concern language in a 10-Q filing dated September 10.

Between March 14 and March 20, all 137 Dave & Busters locations were closed due to the coronavirus pandemic.

Dave & Busters initially furloughed nearly all of its employees and, as of August 2, had reached 92 rent relief agreements, which includes rent deferrals. As of September 4, 52 locations were closed, according to the filing.

On September 10, the company reported an 85% decline in second-quarter revenue, to $50.8 million.

These developments have caused a material adverse impact on the companys revenues, results of operations and cash flows, including the companys ability to meet its obligations when due, the filing said.

These conditions raise substantial doubt about the companys ability to continue as a going concern for a period of one year from the date of the financial statement are issued.

Truist Securities analysts say the stock plunge is a severe overreaction, citing the identical language from a previous 10-Q. The stock dip presents a buying opportunity.

We continue to assume that Dave & Busters lenders will again grant covenant relief, especially given visibility into recovering EBITDA at that time as the company emerges from COVID crisis, analysts wrote.

Truist rates Dave & Busters stock buy with a $22 price target.

Dave & Busters stock has sunk nearly 65% for the year to date while the S&P 500 index SPX, -0.84% has gained 3.4% for the period.

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Dave & Buster's stock plunges 26% on bankruptcy fears, but analysts say it's investor 'overreaction' - MarketWatch