GOLF - Topgolf Callaway Acushnet gain after shock PGA-LIV merger raises hopes for global growth

2023-06-07 14:16:16 ET

Topgolf Callaway Brands Corp. ( MODG ) and Acushnet Holdings Corp. ( NYSE: GOLF ) both trade higher as investors digest the implications of the industry-rattling merger between the PGA Tour, Saudi-backed LIV Golf and the European Tour.

While the announcement shocked most participants in the golf world and has led to some accusations against PGA management, Jefferies said it believes the agreement could drive more attention and overall interest to the game of golf.

Analyst Randal Konik and team believe the golf merger agreement holds "immense potential" to elevate the sport of golf to new heights through the collective resources, capital and expertise of the three golf organizations. Per Konik, those pooled resources could lead to heightened attention and overall interest in the golf on a global scale, especially with the infusion of capital from PIF signifying a strong commitment to the growth and promotion of the sport.

"This injection of funds will enable the newly formed company to embark on ambitious initiatives aimed at expanding the reach of golf and cultivating a broader fan base. The global nature of this collaboration creates a more vibrant golfing landscape attracting new players, sponsors and fans which will inevitably fuel growth for golf OEMs."

Konik said both Topgolf Callaway Brands Corp. ( MODG ) and Acushnet Holdings Corp. ( GOLF ) are lined up to be beneficiaries from the mega-merger, although MODG is seen as the preferred pick given its asymmetric upside potential. Jefferies has a Buy rating on MODG and price target of $56, which reflects ~15X multiple to the 2024 adjusted EBITDA estimate. GOLF is rated at Hold by Jefferies and assigned a price target of $51.

Shares of Topgolf Callaway Brands ( MODG ) were up 1.45% at 2:15 p.m., while and Acushnet Holdings Corp. ( GOLF ) was 2.99% higher.

More on golf stocks:

• Acushnet Holdings is tipped by Morgan Stanley to have issued conservative guidance
• Topgolf Callaway: An Earnings-Reaction Bogey, But Greener Pastures Ahead
• Growth metrics on Topgolf Callaway
• Growth metrics Acushnet

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