A Stock That Could Rise Fore! (Actually 3x) In The Coming Year, Says Wall Street Analyst

Over a five-year growth period, the overall number of golfers climbed from 61 million to 66.6 million, and Topgolf Callaway Brands Corp MODG earnings prove it, with Jefferies Investment Banking seeing a potential 200% upside in the stock.

Golf became significantly more popular around the world from 2016 to 2021 thanks to the inclusion of over 5.5 million new players, according to R&A and Sports Marketing Surveys' research. 

What Happened: Top Golf Callaway is a “beat and raise, and record results story on repeat,” Jeffries analyst Randal Konic said in a note to investors Friday, attributing its quarterly performance to greater sales and EBITDA from the Core Callaway segment and a stronger EBITDA contribution from Topgolf.

Topgolf Callaway posted total bookings of $989 million in the third quarter, 3.91% ahead of consensus estimates and an EPS of 23 cents, up 34.17% over consensus estimates.

The company raised its guidance again, Konic noted.

“[Fiscal 2022] topline is now expected to be in the $3.97B-$3.99B range ($3.95B-$3.97B prior) and adjusted EBITDA is now expected to be in the $560M-$570M range ($555M-$565M prior),” Konic wrote.

Topgolf management also guided fiscal 2023 topline growth of 10% and an adjusted EBIDTA of $600 million.

“With that said, we believe F'23 guidance comes in conservative and expect continued quarterly trends of beating & raising guidance a possibility,” the analyst said. 

The $65-million foreign exchange (FX) headwind Topgolf management forecasted for 2023 is sour, but most companies are dealing with similar issues, he said.

Looking Ahead: Jefferies has a Buy rating to the stock with the price target increased by $1 to $56. 

“The market won't be able to ignore these strong fundamentals for much longer, so asymmetric stock upside is ahead, in our view,” Konic said. “Only negative here is FX.”

MODG Price Action: Shares of Topgolf Callaway are trading 7.1% higher Friday to $18.66. The stock has a 52-week high of $31.51 and a 52-week low of $16.80.

Read next: Analysis: Stars Like Dechambeau, Johnson, Mickelson Are On Board With LIV Golf, But What About The Fans?

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