Investing.com -- Shares in Dave&Buster’s Entertainment (NASDAQ:PLAY) plummeted sharply Wednesday after the company announced the exit of CEO Chris Morris and reported disappointing third-quarter results.

The stock fell more than 17% in premarket trading.

The Dallas-based arcade and restaurant chain said on Tuesday that Morris, who became CEO following the company’s merger with Main Event in June 2022, is departing to explore other opportunities. Morris has stepped down after two years in the role. Board chair Kevin Sheehan will serve as interim CEO.

Morris’ resignation comes amid a challenging period for the company, which reported a much larger third-quarter loss and a decline in revenue.

Specifically, Dave&Buster posted a Q3 loss of $0.45 per share, missing analysts' expectations of a $0.33 loss.

Revenue came in at $453 million, also below the consensus estimate of $469.93 million.

“During the quarter, we continued to make progress towards our long-term strategic goals. We opened up three new stores, which are on track to generate strong cash on cash returns as we have consistently demonstrated throughout our history,” said Darin Harper, CFO of Dave&Buster’s.

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

Reacting to these developments, multiple analysts cut their ratings on Dave&Buster's shares.

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

“The unexpected resignation of its CEO, worse than expected sales lifts from recent remodels and another quarterly sales miss in 3Q24 shakes our confidence in PLAY's sales catalysts,” analysts led by Jake Bartlett said.

“We view the biggest risk to our downgrade as improving macro conditions, but see potential offsets with execution risk. While PLAY's valuation is not demanding, we now prefer to remain on the sidelines until there is evidence of its turnaround."

Separately, William Blair analyst Sharon Zackfia cut its PLAY rating from Outperform to Market Perform, citing “less conviction on a steady improvement in comp trends in 2025.”

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