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Dave & Busters (PLAY) Put Sales See Limited Downside into Brand Relaunch, Potential Sports Betting Partnership

by | Jul 6, 2021

Dave & Busters (PLAY) small-cap seeing a lot of bullish put sales recently including 1,000 January $40 puts and 2,500 December $35 puts sold on 7/6. PLAY has also seen sellers in the August $35 puts and January $35 puts while the July $40 calls with 4750 in open interest from buyers in late June. Shares have run sharply since November and forming a narrow weekly bull wedge since mid-March. A break higher above $43.75 key to setting up a run back to recent highs at $50 and then longer-term measured move to $56. The $1.9B company trades 15.2X earnings and 3.5X sales. PLAY has seen their business recover well recently with the rate of vaccinations picking up and back near 2019 levels with robust sequential improvement. The company expects to continue looking at the pipeline of stores and where they can re-accelerate growth in the next 12-18 months to get to the 230-250 store goal they laid out a few years ago. PLAY is on the cusp of a big relaunch as well with an overhauled menu, new investment in games, and more expansive media strategy. Analysts have an average target for shares of $48 with a Street High $57. Piper raising estimates in June expecting strong trends to continue into Q2 as the reopening continues to gain momentum. Wells Fargo positive note in June and citing an interesting catalyst saying that any potential announcement regarding an in-store sports-betting partnership could spark a near-term cover rally in the stock. The company noted that a sports betting partnership could be tied into a broader football season drive, “we have a number of initiatives planned to establish Dave & Buster’s as the ultimate tailgate destination. These include proprietary video content, live entertainment in select markets, contest designed to draw our guest into the game and, of course, compelling food and beverage promotions.” Short interest is 19%. Hedge fund ownership fell 14% in Q1. Samlyn Capital a buyer of a new stake.