Dave & Buster's Shares Plummet After CEO Exit

Investing.com — Shares in Dave & Buster’s Entertainment (NASDAQ:PLAY) dropped sharply on Wednesday following the announcement of CEO Chris Morris' departure and disappointing Q3 results.

The stock fell over 17% in premarket trading.

The Dallas-based arcade and restaurant chain revealed on Tuesday that Morris, who became CEO after the merger with Main Event in June 2022, is leaving to explore other opportunities. He steps down after two years in the role, with board chair Kevin Sheehan taking over as interim CEO.

Morris’ resignation coincides with a challenging phase for the company, which reported a more significant third-quarter loss and a revenue drop.

Specifically, Dave & Buster's reported a Q3 loss of $0.45 per share, missing analysts' expectations of a $0.33 loss. Revenue stood at $453 million, also falling short of the consensus estimate of $469.93 million.

“During the quarter, we continued to make progress towards our long-term strategic goals. We opened three new stores, anticipated to generate strong cash returns, consistent with our history,” said Darin Harper, CFO of Dave & Buster’s.

Board member Michael Griffith will serve as lead independent director while the company collaborates with executive search firm Heidrick & Struggles (NASDAQ:HSII) to find a permanent successor for Morris.

In light of these events, several analysts downgraded their ratings on Dave & Buster's shares.

Truist Securities downgraded the stock from Buy to Hold and decreased the target price from $56 to $36.

“The unexpected resignation of its CEO, disappointing sales from recent remodels, and another quarterly miss raise concerns about PLAY's sales drivers,” analysts led by Jake Bartlett stated.

“We consider improving macro conditions as a potential offset to our downgrade, but execution risks remain. While PLAY's valuation is appealing, we prefer to stay sidelined until there’s evidence of turnaround.”

Additionally, William Blair analyst Sharon Zackfia lowered its PLAY rating from Outperform to Market Perform, expressing “less confidence in steady improvement in comp trends in 2025.”