With the retreat in the coronavirus that happened last year, both diners and investors are returning to the restaurant sector.
The restaurant industry, hardly an investor favorite in the thick of the pandemic, seemed to enjoy something of a comeback this week.
Several mainstays in the sector saw their share prices rise in the Monday-Thursday period, data provided by S&P Global Market Intelligence shows. Dave & Buster’s Entertainment ( PLAY 0.20% ) rose by almost 14%, for example, while BJ’s Restaurants ( BJRI -1.99% ) advanced at a nearly 13% clip, and Chuy’s Holdings ( CHUY -1.52% ) moved 7% higher.
The key reason for the renewed optimism is, sensibly enough, the apparent receding of the pandemic. With both cases and fatalities continuing to fall in many locations, many mask mandates have been rescinded. So consumers are now less fearful of catching COVID-19 in a public place (like the local restaurant they’ve been avoiding since 2020) and no longer have to worry about that annoying piece of cloth on their face.
Compounding that was an approving analyst note about one restaurant chain operator in particular. On Wednesday, Jefferies‘ (NYSE: JEF) Andy Barish reiterated his buy recommendation on Dave & Buster’s at a $60 share price target. He did so on the basis of the company’s $835 million deal for Main Event, which specializes in venues for family entertainment.
Although this acquisition wasn’t exactly greeted warmly by investors when announced, Barish believes that it “will allow for more growth in strong [Dave & Buster’s] markets such as the West Coast and East Coast given [the company’s] domain knowledge and relatively limited exposure in those markets for Main Event.”
But the BA.2 coronavirus sub-variant could wreak more havoc on a weary world, plus supply chain difficulties are impacting restaurants. Therefore the industry is far from out of the woods yet. Investors should be careful, then, and keep an eye on developments. BJ’s, for example, is slated to publish its first-quarter results next Thursday, April 21.