Callaway Golf Is A Key Holding For Small-Cap Investors

Jefferies’ Randal J. Konik believes the Q3 results announced by Callaway Golf Co ELY reaffirm that the company has continued to gain market share against the backdrop of a mixed environment.

Konik reiterated a Buy rating on the company, while raising the price target from $14 to $16.

Market Share Gains

Callaway Golf reported its Q3 EPS at ($0.06), ahead of the consensus and the guidance, driven by better-than-anticipated revenue and operating expenses, partly mitigated by weaker gross margins.

“With the future monetization of its TopGolf stake as a catalyst, we view ELY shares as a key holding for small cap PMs,” Konik mentioned.

Management announced that the company saw significant growth in market share, with 22.7 percent year-to-date share of the hardgoods market, with 25.7 percent share of clubs and 13.7 percent share of balls.

Q3 Results

Although the international market continues to be “choppy,” the analyst noted that increase in the ASP across several categories highlight the strength of the brand, while pointing to potential for future share gains.

A Reuters report stated that Callaway Golf delivered a 6.9 percent increase in net sales during Q3:16, while continuing to realize benefits from its operational improvements. The company also raised its earnings guidance for 2016.

New Appointment

In addition, the company announced the hiring of Hideyuki "Rock" Ishii as its senior director of advanced golf ball research.

Konik believes Ishii will be “valuable addition to an already strong R&D team at ELY.”

At last check, Callaway was up 12.36 percent at $11.09.