ELY - Embedded Expectations Analysis - 2021 10 11
Callaway Golf Company (ELY:USA) currently trades around corporate averages relative to UAFRS-based (Uniform) earnings, with a 23.2x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about business growth, pricing power, and higher costs.Specifically, management may lack confidence in their ability to capitalize on unprecedented growth in golf interest, meet performance targets in the Golf Equipment segment, and sustain same venue sales growth. In addition, they may have concerns about the impact of COVID policies in Europe on the Jack Wolfskin brand, the strength of the walk-in business for Topgolf, and continued supply constraints in the second half. Furthermore, management may also lack confidence in their ability to meet installed bay guidance in the Toptracer business, raise prices to offset inflationary pressures, and continue gaining share in the core golf business. Finally, they may be overstating the long-term potential of Topgolf to attract new golfers and they may have concerns about capacity investments.
Callaway Golf designs, manufactures and sells golf clubs (drivers, fairway woods, hybrids, irons, wedges and putters), golf balls, golf bags and other golf-related accessories. The company generally sells its golf-related products to golf retailers (including pro shops at golf courses and off-course retailers), sporting goods retailers, Internet retailers and mass merchants, directly and through its subsidiaries, and to third-party distributors in the U.S. and in various countries around the world. The company also sells pre-owned Callaway golf products through its website www.callawaygolfpreowned.com and sells Callaway golf products through its websites www.callawaygolf.com and www.odysseygolf.com.
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