Dave & Buster's Options Traders Busy After Earnings – Schaeffers Research

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Dave & Buster’s Entertainment Inc (NASDAQ:PLAY) is trading at the bottom of the Nasdaq this morning, after the restaurant and entertainment name unveiled an unexpected drop in same-store sales (SSS) for the first quarter, with CEO Brian Jenkins citing “the Easter shift.” The company also lowered its full-year forecast.

A round of bearish brokerage notes is only amplifying pressure on PLAY stock. SunTrust Robinson chimed in with a downgrade to “hold” from “buy.”, saying “without positive SSS, we no longer expect multiple expansion.” Gordon Haskett also cut its rating to “hold” from “buy,” while at least five price-target cuts came through.

Prior to today, analysts were overwhelmingly bullish on Dave & Buster’s stock, with 100% of those in coverage maintaining a “buy” or better. Meanwhile, the average 12-month price target of $54 is a 27.2% premium to current trading levels.

Options traders have been quick to get in on the post-earnings action, too. Already today, PLAY has seen around 8,900 calls and 3,500 puts change hands, 31 times the expected intraday amount, and volume pacing in the 100th annual percentile. The weekly 6/14 40-strike put is most active, and it looks like traders are buying new positions here to bet on more downside through week’s end, when the series expires.

At last check, PLAY shares were down 20.8% at $40.83, pacing for their worst day since a 22.3% drop on Jan. 8, 2018. The stock bottomed at a 13-month low of $40.68 earlier, and is now down 8.7% year-to-date.