O'Keefe Stevens Advisory, Inc. on Callaway Golf
Thesis
The adviser reiterates that the Callaway thesis is centered on the core golf business plus repurchases following the sale of Topgolf. Callaway raised full-year guidance after Q2 adjusted EBITDA increased 36%, and the balance sheet improved as $1.4 billion of debt was retired. At June 30, the company held approximately $204 million in net cash and had repurchased about $84 million of stock under a $200 million authorization. The adviser references a previously stated fair-value estimate above $20 per share against a Q3 closing price of $14.09. A weaker second-half product calendar and pressure on discretionary spending are the chief obstacles to realizing that upside.
“Golf + buybacks is still the thesis.”
Key risks
- A later iron-product launch and SKU cuts point to a softer second half.
- Higher gasoline and diesel prices reduce consumers’ disposable income.
- Less discretionary spending can weaken golf-product demand.
- The mid-quarter Good Good controversy illustrates unforeseen brand or distribution disruption.