Topgolf Callaway Brands might be on the brink of a significant upswing as it prepares to split into two separate entities, according to insights from Jefferies. Analyst Randal Konik has raised his recommendation from a hold to a buy and upped his price target from $11 to $13, suggesting a potential 65.4% increase from Tuesday’s closing price. The backdrop to this optimistic outlook is a steep dive in the stock’s value, which has plummeted nearly 45% over the past year, and more than 47% over the last six months.
“Despite weak fundamentals at Topgolf and some missteps at Callaway, the current share price seems undervalued,” Konik explained. “As the company navigates through its planned separation, we see a valuation of nearly twice the current share price. The expertise in golf equipment remains strong, and the overall golf market benefits from solid growth.”
Looking forward, Konik highlighted that the company is in the midst of spinning off its Topgolf business, expected to cement its footing by the latter half of this year. Post-spinoff, he projects Callaway to reach $278 million in adjusted EBITDA by 2026, translating to an annual growth rate of 6% over two years. “Topgolf, once seen as a promising edge among traditional golf stocks, has shifted to being a downside risk,” he noted. “Its underwhelming same-store sales have overshadowed successes in Callaway’s core business.”
Konik also pointed out the surging popularity of golf. In October alone, rounds played surged by 11.5%, marking the highest year-over-year growth since 2020. His optimistic stance is shared by five other Wall Street analysts out of 14, based on LSEG data, recommending strong buy or buy positions. Meanwhile, six analysts advocate holding the stock. The average price target stands at around $14, suggesting an impressive 82% potential upside. Following these developments, shares rose nearly 9% in premarket trading on Thursday.
