BofA maintains Neutral on MODG stock, keeps $9 target

On Tuesday, BofA Securities maintained a Neutral stance on Topgolf Callaway Brands (NYSE:MODG) with a steady price target of $9.00. The stock, currently trading at $6.70, has experienced significant pressure, falling over 53% in the past year. According to InvestingPro analysis, the stock’s RSI suggests it’s in oversold territory, with 11 additional real-time insights available to subscribers. The firm’s analysis followed the company’s fourth-quarter 2024 earnings report, which revealed adjusted EBITDA at $101.4 million, surpassing BofA’s estimate of $78.4 million. The company’s last twelve months EBITDA stands at $463.2 million, with InvestingPro data showing a current ratio of 1.94x, indicating strong short-term liquidity. The better-than-expected performance was attributed to an improvement in Topgolf’s same venue sales (SVS), which declined by 8% compared to the anticipated 13%. This improvement was largely due to an uptick in traffic, as corporate event comparisons accelerated, dropping to -5% in the fourth quarter from -19% in the third quarter. The increase was driven by more flexible local bookings and enhanced coordination for large accounts.

Topgolf Callaway’s Golf Equipment segment also reported a robust quarter, with a 12.7% increase that outperformed BofA’s estimate of 5.6%. This growth was particularly strong in putters, bolstered by recent product launches in the fourth quarter.

Despite these positive developments, BofA Securities chose not to adjust their price objective, keeping it anchored at $9.00. The decision was based on an enterprise value (EV) of 7 times the firm’s estimated adjusted EBITDA for calendar year 2026, which has been revised down to $532 million from the previous forecast of $619 million. BofA cited ongoing pressure in Topgolf’s same venue sales as the rationale behind this valuation.

Topgolf Callaway Brands’ stock performance following this announcement will continue to be observed by investors and market watchers alike, as the company navigates the competitive landscape of the leisure and entertainment industry. While analyst targets range from $8 to $16, suggesting potential upside, comprehensive analysis from InvestingPro reveals deeper insights into the company’s valuation and growth prospects, available through their detailed Pro Research Report, part of their coverage of over 1,400 US stocks.

In other recent news, Topgolf Callaway Brands reported its fourth-quarter 2024 earnings, which exceeded analysts’ expectations. The company posted an earnings per share (EPS) of -0.33, beating the forecasted -0.38, and generated revenue of $924 million, surpassing the anticipated $888.83 million. This performance reflects a 3% year-over-year increase in revenue and a 45% rise in adjusted EBITDA to $101 million. Looking ahead, the company provided full-year 2025 revenue guidance between $4.0 billion and $4.185 billion, with adjusted EBITDA expected to range from $415 million to $505 million.

Jefferies analyst Randal Konik adjusted the price target for Topgolf Callaway to $10.00 from $13.00 while maintaining a Buy rating, citing solid fourth-quarter results that outperformed Wall Street’s expectations. Despite challenges such as weaker same-venue sales and foreign exchange headwinds, Konik highlighted the positive impact of new venue openings and strategic growth initiatives. The anticipated separation of the Topgolf segment in the second half of 2025 is expected to further influence the company’s financial trajectory.

The company faces ongoing foreign exchange and apparel market challenges, which are expected to impact fiscal year 2025 outcomes. However, strategic initiatives, including new product launches and operational improvements, are underway to mitigate these effects. CEO Chip Brewer emphasized the company’s focus on ensuring both businesses are in strong financial and strategic positions at the time of the anticipated separation. Analyst feedback from Jefferies provides insight into the potential financial direction of Topgolf Callaway as it continues to implement its business strategy.

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