MODG stock is still a buy, Roth says

Despite headwinds, Roth MKM analyst George Kelly says he is still a believer in Topgolf Callaway (Topgolf Callaway Stock Quote, Chart, News, Analysts, Financials NYSE:MODG), if only a little less so.

On November 8, MODG reported its Q3, 2023 results. The company posted EBITDA of $163.3-million on revenue of $1.04-billion.

“This quarter our team once again delivered solid operating results across all segments of our business,” CEO Chip Brewer said. “Both Golf Equipment and Active Lifestyle had strong quarters while Topgolf, despite same venue sales that were lower than expected, was able to expand venue margins, an impressive accomplishment in a challenging quarter, and remains on track to successfully open 11 new venues in 2023. With current same venue sales trends and foreign exchange rates, we are lowering our forward guidance and taking decisive action to lower both costs as well as capital expenditures and to drive additional synergies across our business. All of this is aimed at de-risking future performance while maintaining our strong growth prospects. We remain on plan to deliver positive free cash flow for the total Company and Topgolf this year and we are confident that we will continue to profitably grow our business this year and going forward.”

The analyst who characterized this quarter as “weak” nonetheless said he is a believer in it.

“We see value in the business on a sum-of-the-parts basis and still believe in the long-term growth opportunity for Topgolf despite current headwinds,” he wrote. “However, we expect the stock to be range-bound given difficult Topgolf comps and a lack of near-term catalysts.”

In a research update to clients November 17, Kelly maintained his “Buy” rating on Topgolf Callaway while lowering his price target from $30.00 to $15.00.

The analyst thinks MODG will generate EBITDA of $652-million on revenue of $4.54-billion in fiscal 2024. He expects those numbers will improve to EBITDA of $738.9-million on a topline of $4.84-billion the following year.