Thursday, on the New York Stock Exchange, Topgolf Callaway Brands (NYSE: MODG) stock experienced a shift in its rating. CFRA has downgraded the company's rating from Buy to Hold while maintaining a price target of $18.00.
The firm has based this target on an 8.0x multiple of their 2024 EBITDA estimate, noting that it is lower than the company's 2-year average forward EV/EBITDA multiple of 11.5x.
Topgolf Callaway reported a normalized first-quarter earnings per share (EPS) of $0.09, which surpassed the consensus estimates by $0.08. The company's revenues for the quarter were $1.14 billion, slightly below the expected $1.17 billion.
The breakdown by segment showed that Topgolf revenues increased by 4.8%, Golf Equipment went up by 1.4%, but the Active Lifestyle segment saw a 15.2% decline. The decrease in Active Lifestyle was attributed to lower wholesale revenue at Jack Wolfskin, which the company linked to a challenging economic environment in Europe.
The report also highlighted a significant reduction in inventory, which dropped 24.4% year-over-year to $703 million. Topgolf Callaway announced the repricing of its Term Loan B, which is anticipated to result in annual savings of $7 million. The company plans to use these savings to accelerate loan repayments, with the first partial prepayment scheduled for May.
Despite lowering its revenue outlook, Topgolf Callaway raised its 2024 EPS guidance to $0.35 at the midpoint. The adjustment reflects the company's current assessment of its value, with the stock believed to be trading near its fair value according to the CFRA analysis.
InvestingPro Insights
Topgolf Callaway Brands (NYSE: MODG) has caught the attention of investors and analysts alike with its recent financial performance and stock movement. According to real-time data from InvestingPro, MODG currently holds a market capitalization of $2.87 billion, with a P/E ratio of 39.46, reflecting a high earnings multiple that investors are willing to pay for its earnings. The company's P/E ratio adjusted for the last twelve months as of Q1 2024 stands at 31.12, indicating a potential reevaluation by the market of its earnings capacity in comparison to its stock price.
InvestingPro Tips highlight several key aspects of MODG's financial health and stock performance. Notably, the company's liquid assets exceed its short-term obligations, providing it with a solid liquidity position. Additionally, Topgolf Callaway has demonstrated a strong return over the last three months, with a price total return of 18.56%. This is further complemented by a substantial price uptick over the last six months, boasting a 57.97% return. Despite these strong returns, the company does not pay a dividend to shareholders, which is an important consideration for income-focused investors.
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