Follow the Cheese (w/ John Jannarone) | Trade Ideas | Summary and Q&A

TL;DR

CEC Entertainment, the parent company of Chuck E. Cheese and Peter Piper Pizza, is a value play with growth potential, trading at a low valuation and expected to grow. The stock offers a steady investment opportunity with potential upside.

Key Insights

• ❓ CEC Entertainment offers an investment opportunity through its SPAC acquisition.
• 🧑 The company's focus on remodels and adult-friendly offerings have contributed to its positive performance.
• 🎴 With its low valuation and expected growth, CEC Entertainment is considered a value play.
• 🥺 The introduction of "all you can play" wristbands is a catalyst for growth, leading to higher revenue and margins.
• 😫 CEC Entertainment's positive performance during the recession sets it apart from other companies in the industry.
• 💄 The scarcity of restaurant IPOs in recent years makes CEC Entertainment an attractive investment option.
• 🥹 Holding the investment for two to three years is recommended to see the thesis play out.

Transcript

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Questions & Answers

Q: What is the valuation of CEC Entertainment and why is it considered a good value play?

CEC Entertainment is trading below seven times EBITDA and is expected to grow around 10% in the next few years. This low valuation makes it an attractive investment opportunity.

Q: What makes CEC Entertainment unique compared to other companies in the restaurant industry?

Unlike many restaurants that struggled during the recession, CEC Entertainment managed to maintain positive same-store sales. This, combined with its focus on remodels and adult-friendly offerings, sets it apart from other players in the industry.

Q: What are the catalysts for growth for CEC Entertainment?

One catalyst for growth is the introduction of "all you can play" wristbands, which has been well-received by customers and can lead to higher revenue and margins. Additionally, the scarcity of restaurant IPOs in recent years makes CEC Entertainment an attractive investment opportunity.

Q: What is the suggested trading approach for CEC Entertainment?

It is recommended to focus on the common stock rather than the warrants. The common stock offers a safer investment as warrants can become worthless if the deal is not approved.

Summary & Key Takeaways

• CEC Entertainment is the target of a SPAC (special purpose acquisition company) and offers an investment opportunity around $10 a share.

• The company, known for its Chuck E. Cheese and Peter Piper Pizza brands, has shown resilience and positive sales even during the Great Recession.

• With a focus on remodels and attracting adult customers, CEC Entertainment is expected to continue generating healthy numbers.