Callaway Golf (ELY) - Get Callaway Golf Company Report shares rose Tuesday after Bank of America initiated coverage of the golf equipment titan with a buy rating and a $45 price target based on fundamentals.
That would give Callaway’s valuation “a slight premium to other leisure brands and experience models,” Analyst Alexander Perry wrote in a commentary.
The rating stems from the following factors:
· “Strong market share in the growing golf equipment market;
· “Expected stickiness among new entrants amid a surge in solitary leisure participation;
· “Aging millennials should drive sustained interest in golf;
· “BofA-aggregated credit and debit card data show consumer spending on golf remains strong;
· “Potential upside in 2022, driven by new product launches, pricing, and channel refill;”
· A recovery for Callaway’s Topgolf unit ahead of expectations.
Shares of Callaway Golf, Carlsbad, Calif., recently traded up 3% at $30.66.
As for market share, “overall golf club sales increased 12% in 2020, according to point-of-sale data from Golf Datatech. And they further accelerated in 2021, increasing 46% year to date through Sept. 1,” Perry said.
“Callaway golf club sales increased 8% in 2020 and have accelerated to 41% year to date. Callaway holds the No. 2 market share position in golf clubs year to date, with 24%.
“But we expect Callaway to increase its share in 2022, given expected higher volume Mavrik/Chrome soft launches.”
As for golf-participation stickiness, “the increased demand for socially distanced outdoor recreation activities due to Covid led to the most significant increase in on-course golf participation in 17 years” in 2020, Perry said.
“Off-course participation experienced even faster growth.”