Sell Rating for Topgolf Callaway Brands Amid Margin Concerns and Macroeconomic Risks

In a report released today, Megan Alexander from Morgan Stanley maintained a Sell rating on Topgolf Callaway Brands (MODG – Research Report), with a price target of $6.00.

Megan Alexander has given her Sell rating due to a combination of factors impacting Topgolf Callaway Brands. Despite the company achieving a notable EBITDA beat in the first quarter, largely driven by better-than-expected margins in its core product businesses, there are underlying concerns. The impressive margin performance was partly attributed to a one-time lease termination incentive, which is not expected to recur in future quarters.
Additionally, there are significant challenges facing the Topgolf segment, with sales volume significantly down and weaker trends continuing. The company’s efforts to improve traffic through new initiatives are being offset by a price-sensitive consumer base, and corporate event bookings have softened. These factors have led to a reduction in the company’s sales volume outlook and venue margins. Furthermore, macroeconomic concerns add downside risk to the company’s guidance, with limited flexibility to absorb potential demand deterioration, prompting the Sell rating.

Alexander covers the Consumer Cyclical sector, focusing on stocks such as Topgolf Callaway Brands, Hasbro, and Vail Resorts. According to TipRanks, Alexander has an average return of 3.9% and a 55.95% success rate on recommended stocks.