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On Tuesday, CFRA analyst Zachary Warring adjusted the stock rating for Topgolf Callaway Brands (NYSE: MODG), moving it from Buy to Hold and reducing the price target from $10.00 to $8.00. The stock, currently trading at $6.69, has fallen over 53% in the past year. According to InvestingPro analysis, the company appears slightly undervalued, with a current EV/EBITDA multiple of 10.63x. The revision reflects concerns over anticipated revenue and margin challenges as well as increasing competition faced by Topgolf. The new price target is based on a 10.0x multiple of the firm’s projected 2025 adjusted EBITDA, which is beneath the company’s three-year average forward EV/EBITDA multiple of 11.3x.
Warring noted that the downgrade was influenced by a revised earnings per share (EPS) estimate for 2025, which was decreased by $0.30 to $0.20, while initiating the 2026 EPS estimate at $0.40. Topgolf Callaway recently reported a normalized fourth-quarter EPS of ($0.33) compared to ($0.30) the previous year, surpassing consensus estimates by $0.09. Revenue for the quarter came in at $924 million, exceeding expectations by $40 million. InvestingPro data shows the company’s trailing twelve-month revenue reached $4.24 billion, though with a concerning negative net income. For deeper insights into MODG’s financial health and 12 additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.
The company’s performance varied across its segments, with Topgolf’s same venue sales dropping by 8% year-over-year, while revenue from the Golf Equipment segment grew by 11%, and Active Lifestyle segment saw a 1% increase. Despite a flat performance in total revenues for Topgolf, with new venue openings balancing out declines in same venue sales, the quarter’s operating margin improved by 260 basis points year-over-year to 5.2%.
Looking ahead, Topgolf Callaway has provided guidance indicating a downturn in both revenues and EBITDA for 2025, with Topgolf’s same venue sales expected to fall in the mid-single digits. This outlook, combined with the valuation concerns and anticipated fundamental declines, led to Warring’s decision to lower the stock rating and price target, setting a cautious tone for the company’s performance in the upcoming year.
In other recent news, Topgolf Callaway Brands reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an EPS of -0.33, compared to the forecast of -0.38, and achieving revenue of $924 million, exceeding the anticipated $888.83 million. The company’s performance was driven by strong results in its Topgolf segment, with improved same venue sales and the opening of new venues aiding EBITDA growth. Despite these positive results, BofA Securities maintained a Neutral rating on the stock with a price target of $9.00, citing ongoing pressure in same venue sales as a concern. Truist Securities, however, maintained a Buy rating with a $12.00 target, noting improved trends in service and sales excluding weather impacts. Jefferies adjusted its price target for the company to $10.00 from $13.00 while keeping a Buy rating, acknowledging the company’s solid fourth-quarter results but noting challenges such as foreign exchange and tariff-related headwinds. Analysts continue to watch Topgolf Callaway Brands closely as it navigates these challenges and prepares for a potential separation of its Topgolf segment in the second half of 2025.
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