If the insider activity in Topgolf Calloway Brands (NYSE: MODG) can be used as a guide, the golf stock can indeed crawl out of its bunker, regain the fairway, and rally to score value for shareholders. The insiders started ramping up their activity late last year and have been buying the stock on balance ever since.
The activity is mixed, a director or 2 has trimmed their holdings, but the balance of activity is firmly bullish, and the support is broad. Multiple transactions by 4 insiders, including a director, the CEO, CFO, and an EVP, have total holdings up to almost 12%. This activity is consistent with a long-term low in the stock that is beginning to look like a bottom for the market.
Sell-Side Interest Supports Topgolf Calloway Brands
The institutional activity also suggests the bottom is in for this stock. The institutional activity surged in Q2 along with the announced merger of LIV and The PGA and netted the group about 30% of the stock. They own about 80% of the stock now and may push that closer to 90% by the end of the summer.
Analyst Randal Konik of Jefferies said the merger, which includes the European Tour, says the deal has immense potential. In his view, it could reinvigorate interest in the game globally and usher in a new era of growth. The deal includes an injection of funds from the PIF, which, combined with the group's collective expertise and assets, should boost viewership if not interest in the sport.
The analysts haven’t had much to say about Topgolf Calloway Brands, but the group was bullish on the name before the merger announcement. The 6 analysts with price targets tracked by Insidertrades.com have the stock pegged at a Buy with a price target about 60% above the current action.
The next obvious catalyst for the stock is in early August, when it is scheduled to report earnings. The analysts have been lowering their target for revenue and earnings, setting the bar low.
The consensus is for revenue to grow sequentially by low single digits and mid-to-high-single-digits YOY with margin compression. The company outperformed on the top line in the last 4 quarters and on the bottom for 3 of the last 4 quarters.
There were many positives in the Q1 earnings report for investors to contemplate. Among them are 6 consecutive quarters of comp-venue growth, operational improvements are ahead of target, debt refinancing was completed, cash flow was improved, guidance was raised, and positive FCF is expected by the end of the year.
Acushnet Holdings; Leads The Market
Acushnet Holdings (NYSE: GOLF) shares lead Topgold Calloway but have less room to run. The institutions also favor this stock but are not buying it in volume as with MODG, and the analysts are less enthusiastic. They rate the stock at Hold and see it trading near fair value at current price points. As for sentiment, it has cooled over the past year to Hold from Buy while the sentiment in MODG warms up.
However, Acushnet also has a potential catalyst in the Q1 earnings. The analysts are not expecting much and have been lowering their targets. This company also tends to beat expectations and is benefiting from tailwinds. Shares of the stock are moving up and trying to set a new 2-year high; solid results and outlook could drive this stock to a new all-time high.