Topgolf Callaway To Face Revenue Challenges As Same-Venue Sales Drop By 8%: Analyst

J.P. Morgan analyst Matthew R. Boss reiterated a Neutral rating on the shares of Topgolf Callaway Brands Corp MODG and lowered the price forecast from $9.00 to $8.00.

MODG reported an adjusted EPS loss of 33 cents fourth quarter, surpassing Street estimates of 42 cents. This was driven by a 3% year-over-year revenue growth. This exceeded Street’s expected decline of 1.4% and management’s guidance of a 1.3% decline.

Adjusted EBITDA margins expanded by 320 basis points year-over-year to 11.0%, outperforming Street’s forecast of 9%. This resulted in an adjusted EBITDA of $101.4 million, exceeding both Street’s $79 million and management’s guidance range of $74-84 million.

Segment performance saw Topgolf’s same-venue sales drop by 8%, which was better than Street’s expected decline of 12.7% and management's forecast of a 10% to 15% decrease.

Golf Equipment saw a 12.7% year-over-year increase in revenues, outperforming Street’s expected 7.1% growth, largely due to shipment timing. Active Lifestyle grew by 0.7% year-over-year, exceeding Street's forecast of a 1.7% decline, the analyst noted.

Looking ahead, management provided initial guidance for 2025, projecting revenues of $4.0-4.185 billion. That’s a decline of approximately 1-6% year-over-year (around 5% below the Street’s estimate of $4.32 billion), primarily due to slight decreases in Golf Equipment and Active Lifestyle on a constant currency basis.

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Additionally, consolidated adjusted EBITDA is expected to range from $415 million – 505 million. That’s 18% lower than the Street’s $561 million estimate. This suggests a 290 basis points decline in adjusted EBITDA margins to around 11% (approximately 230 basis points below the Street’s forecast of 13.3%).

For Topgolf, management expects:

2025 revenues of $1.725 billion -1.835 billion (compared to the Street’s $1.85 billion)
Mid-single-digit declines in same-venue sales (vs. Street’s -1.3%) and
Five new venues, with adjusted EBITDA guidance of $240 million – 300 million (vs. Street’s $318 million).

The analyst lowers 2025 adjusted EBITDA to $473 million (vs Street $561 million) and 2026 adj. EBITDA to $497 million (vs Street $564 million).

Boss also anticipates that Topgolf’s same-venue sales will face challenges over the next 12-18 months. Both corporate and consumer demand remain below normal levels.

However, the analyst remains optimistic about the long-term total addressable market (TAM) in the golf industry and Callaway’s leading market share in golf clubs.

The $8 price forecast is based on ~7x the analyst’s FY26 EBITDA (= SOTP math utilizing coverage regression against peer sales & EBITDA profiles for each respective business segment) with 6x EBITDA (= historical trough) pointing to a $6 equity value.

Price Action: MODG shares are trading higher by 0.90% at $6.76 at last check Tuesday.

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