Browsing Golf Industry NewsVIEW ALL

Callaway Golf Stock Moving From Green to Sand Trap

POSTED ON February 3, 2016 @ 10:33 pm

golfclubs1205_600x400

Attention duffers:

After five straight quarterly earnings beats, Callaway Golf (ELYGet Report) looks like it’s in the green and heading for a hole in one.

Its shares, at around $8.60, are up nearly 11% for the past 52 weeks. The stock is on Wall Street’s radar of potential top performers in 2016.

But if you look more closely you will find little, if any, real value.

Must Read: More Squawk From Jim Cramer: Amazon.com’s (AMZN) World Domination Costs Money

Callaway stock has a consensus buy rating and its average analyst 12-month price target of $12 implies some 40% gains from current levels of around $8. However, the stock is not cheap. It carries a price to earnings multiple of almost 200, or nine times the P/E of 21 for the S&P 500 (SPX) index.

In addition, the Carlsbad, Calif.-based company is expected to post of 36-cent loss when it reports fourth-quarter earnings results after the closing bell Thursday.

The expected loss for the quarter comes even as revenue is projected to climb by 10.3%, suggesting Callaway struggles to turn revenue into profits. For the full year, earnings are projected to decline 30% to 14 cents a share, while full-year revenue of $839 million would mark a decline of 5.4% from the year-ago quarter.

The company has done many things right, including delivering 4 cents per share in profit for the third quarter against expectations for a 4-cent loss.

But the easy money has already been made, and new investors should consider what the current P/E and the huge earnings growth expectations imply. Even if Callaway logged its sixth straight earnings beat Thursday, it would need to demolish expectations and deliver upbeat guidance to prevent a selloff in the stock. Given the current weakness in the golf industry, that may be too much to achieve.

In that vein, Calloway stock has less implied value, based on the fiscal 2016 consensus of 34 cents a share, which puts its forward P/E at 25 — eight points higher than the S&P 500 index. Callaway’s third-quarter operating margin of 2% is three percentage points lower than the industry average, according to data compiled by Yahoo! Finance.

It’s tough to forecast strong profits in 2016 when revenue is projected to climb by only 5.4%. That makes Callaway a risky investment. If you want to buy, wait for the stock to get to around $7 before you take a swing at it.

 Source: TheStreet

Comments are closed.


CLICK HERE TO Sign Up for the GIC Newsletter for all the latest Industry News.

Please enter your details:

I am interested in:

  • News
  • Operations
  • Marketing
  • Recruitment / Jobs
  • Grow the Game
Golf Industry Central Grow the Game Central Golf Recruitment Central Golf Operations Central

Bright future ahead for Mornington Golf Club...

The iconic new Par 3 being built on...

UPDATE: Merger Proposal Could See Super Club Tee Off in Vict...

By Mathilda Andersson One of the largest lifestyle...

Daylight “saving grace” for golf in Queensland?...

By Mike Orloff In Australia, Queenslanders would know...

SEEKING: Golf Operations Assistant – Moore Park Golf...

Clublinks is one of Australia’s leading golf, leisure and residential service providers, through the provision of specialist services and industry expertise Clublinks...

Need marketing help but having trouble finding it?...

Hire a virtual marketing assistant. Is your club needing marketing assistance but don’t have the budget for a full or even part...

Bright future ahead for Mornington Golf Club...

The iconic new Par 3 being built on the cliffs of Port Philip Bay By Mathilda Andersson   One of the most...

BDO backs ISPS HANDA World Super 6 Perth...

Global accounting firm BDO have officially partnered with the inaugural ISPS HANDA World Super 6 Perth tournament to be held at Lake...

Greg Norman podcast on his business now and future...

The Shark joined the GOLF.com Podcast this week to discuss those various business ventures, his plans to shake up the golf industry and...

Golf Industry Unites In Support Of Women’s Golf Day Initiative...

New York, NY – On Wednesday, January 25 leaders from the Women’s Golf Day (WGD) initiative will host a news...

Asian Tour to enhance global reach with introduction of Live Stre...

The Asian Tour will expand its reach further afield with the introduction of live streaming for a selected number...

ECCO® Golf renews Asian Tour sponsorship...

Sentosa, Singapore, January 18: Leading golf footwear innovator, ECCO Golf, will extend its partnership with the Asian Tour as...

Greg Norman podcast on his business now and future...

The Shark joined the GOLF.com Podcast this week to discuss those various business ventures, his plans to shake up the golf industry and...

Industry stalwart David Townend launches Azalea Hospitality...

Azalea Hospitality introduces a fresh new approach for leisure developers and owners. Azalea Hospitality is a new full-service golf...