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Callaway Golf (CALY)
NYSE:CALY
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Callaway Golf
(NYSE:CALY)
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Rating:62Neutral
Price Target:
$16.00
▲(16.03% Upside)
Action:ReiteratedDate:01/08/26
The score is held back primarily by weak profitability and deteriorating free cash flow, despite strong technical momentum. Positive catalysts from the earnings call (raised guidance) and corporate actions (Topgolf stake sale, major debt paydown, and buyback authorization) improve the outlook, while valuation remains constrained by a negative P/E and no stated dividend yield.
Positive Factors
Diversified revenue streams
Multiple, distinct revenue streams (Topgolf venue operations plus retail equipment and partnerships) reduce single-market exposure and provide cross‑sell and margin diversification. This structural mix supports steadier cash generation and resilience over the next several quarters.
High gross margins
A ~64.6% gross margin indicates strong product-level profitability and pricing power in equipment and merchandise. High gross margins give the company headroom to absorb SG&A, tariff impacts, and reinvest in Topgolf experiences, supporting margin sustainability over time.
Material deleveraging and liquidity boost
Proceeds from the Topgolf stake sale materially improved liquidity and enabled large debt reduction and share repurchase. Lower net debt and stronger liquidity reduce interest burden and increase strategic optionality for investments or further capital returns over months ahead.
Negative Factors
Negative profitability
Ongoing negative net and EBIT margins signal the company still cannot convert revenue into operating profits. Persistent operating losses constrain self-funding for growth, limit retained earnings, and can force reliance on asset sales or financing to support strategic initiatives.
Severely deteriorated free cash flow
An ~87% decline in FCF indicates a sharp erosion in cash generation versus reported results. Weak cash conversion limits capacity to fund capex, venue openings, or sustained debt repayment without further asset monetization, reducing financial flexibility over the medium term.
Structural headwinds: tariffs and regional demand weakness
Rising tariffs and a meaningful annualized tariff run rate are a recurring cost pressure that erodes margins. Coupled with softer Asian markets and ongoing declines in the 3-plus bay Topgolf segment, these trends pose durable risks to revenue and margin recovery if they persist.
Callaway Golf (CALY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.52B
Dividend YieldN/A
Average Volume (3M)3.42M
Price to Earnings (P/E)―
Beta (1Y)1.10
Revenue Growth-3.58%
EPS Growth-12720.97%
CountryUS
Employees30,000
SectorConsumer Cyclical
Sector Strength84
IndustryLeisure
Share Statistics
EPS (TTM)-0.25
Shares Outstanding183,883,640
10 Day Avg. Volume4,297,109
30 Day Avg. Volume3,422,466
Financial Highlights & Ratios
PEG Ratio<0.01
Price to Book (P/B)0.60
Price to Sales (P/S)0.34
P/FCF Ratio17.31
Enterprise Value/Market Cap1.39
Enterprise Value/Revenue0.86
Enterprise Value/Gross Profit1.36
Enterprise Value/Ebitda-3.55
Forecast
1Y Price Target
$15.50Price Target Upside12.40% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
EPS Forecast (FY)0.3
Revenue Forecast (FY)$2.04B
Callaway Golf Business Overview & Revenue Model
Company DescriptionCallaway Golf Company designs, manufactures, and sells golf equipment, golf and lifestyle apparel, and other accessories in the United States, Europe, Asia, and Internationally. It operates in three business segments: Topgolf, Golf Equipment, and Active Lifestyle. The Topgolf segment operates Topgolf venues equipped with technology-enabled hitting bays, bars, dining areas, and event spaces, as well as Toptracer ball-flight tracking technology. The Golf Equipment segment provides drivers, fairway woods, hybrids, irons, wedges and packaged sets, putters, and pre-owned golf clubs under the Callaway and Odyssey brands, and golf balls under the Callaway Golf and Strata brands. The Active Lifestyle segment offers golf apparel and footwear; golf accessories, including golf bags, golf gloves, headwear, and practice aids under the Callaway brand; men's, women's, and youth apparel as well as footwear, outerwear and accessories under the TravisMathew brand. This segment also provides storage and travel gear for sport and personal use, such as backpacks, travel bags, duffel and golf bags, and accessories under the OGIO brand. In addition, it offers outdoor apparel for men, women and children comprising jackets, trousers, dresses, skirts, and tops; and footwear and outdoor equipment, including packs and bags, travel bags, tents, sleeping bags, and accessories under the Jack Wolfskin brand. It sells its products through golf retailers, sporting goods retailers, online retailers, mass merchants, department stores, third-party distributors, and mail order stores, and directly to consumers through its retail stores and websites. The company was formerly known as Topgolf Callaway Brands Corp. and changed its name to Callaway Golf Company in January 2026. Callaway Golf Company was incorporated in 1982 and is headquartered in Carlsbad, California.
How the Company Makes MoneyTopgolf Callaway Brands generates revenue through multiple streams, primarily from its Topgolf venues, which earn income through game play fees, food and beverage sales, and event hosting. Each venue operates a high-tech driving range where customers pay for access to hitting bays equipped with interactive gaming technology. Additionally, the sale of Callaway's golf equipment, including clubs and balls, serves as a significant revenue source. The company also engages in merchandise sales and partnerships, including collaborations with other brands and sponsorships, which further enhance its earnings. The combination of these diverse revenue streams and a strong brand presence in the golf industry solidifies the company's financial performance.
Callaway Golf Key Performance Indicators (KPIs)
Callaway Golf Earnings Call Summary
Earnings Call Date:Feb 12, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 12, 2026
Earnings Call Sentiment Positive
The call highlights a strong strategic reset: transformative disposals, substantial debt paydown, a net cash position, continued product leadership, healthy golf participation trends, and measured 2026 guidance centered on margin and cash flow. However, meaningful near-term headwinds exist—primarily tariffs (~$75M cumulative vs 2024), planned revenue reductions from mix/launch cadence changes, and short-term EBITDA pressure. Management emphasizes long-term margin improvement and return of capital while acknowledging near-term tradeoffs.Q4-2025 Updates
Positive Updates
Strategic Disposals and Debt Reduction
Sold Jack Wolfskin for $290 million and 60% of Topgolf in a transaction valuing Topgolf at approximately $1.1 billion, generating ~ $800 million in cash proceeds; immediately repaid $1.0 billion of Term Loan B debt, resulting in approximately $480 million outstanding debt and ~$680 million in unrestricted cash, putting the company in a net cash positive position.
Return to Pure-Play Golf with Capital Priorities
Re-established Callaway as a pure-play golf company, retaining a 40% minority stake in Topgolf with no future cash obligations; announced a $200 million stock repurchase program and set capital allocation priorities to reinvest in the business, maintain a healthy balance sheet and return capital to shareholders.
Strong Market Fundamentals and Participation Growth
Golf demand remains healthy: U.S. rounds played up 1.2% in 2025; off-course participation up 63% since 2019 (to ~38 million), on-course participation up 20% since 2019 (to ~29.1 million); female on-course participation up 46%, youth (6-17) up 58%, participation by people of color up 61% since 2019.
Product Leadership and Tour Performance
Callaway and Odyssey brands maintained top-2 U.S. market share positions in clubs and balls; recorded strong tour performance with 61 driver, 92 putter and 35 ball wins globally in the past year; launched 2026 Quantum family of woods/irons, Odyssey AI dual putters (Tri-Force Face driver) and Chrome Tour ball iteration with positive early feedback.
Improvement in Equipment Gross Margins Net of Tariffs
Golf Equipment gross margin increased 10 basis points in 2025; excluding tariffs, equipment gross margin would have improved by approximately 189 basis points, demonstrating effective margin initiatives.
Guidance Reflects Profitability and Cash Flow Focus
2026 guidance: revenue $1.98B–$2.05B (slight decrease at midpoint vs prior year), adjusted EBITDA $170M–$195M, expected free cash flow of ~$100M, CapEx $35M–$40M; Q1 2026 revenue guidance $635M–$665M (~+3% year-over-year at midpoint) and Q1 adjusted EBITDA $110M–$125M.
Strong FY Finish and Better-than-Expected Results
Fourth quarter and full year 2025 results exceeded expectations on revenue and adjusted EBITDA; full-year adjusted EBITDA was $222 million (a $39 million decrease year-over-year but better than expectations) and Q1 revenue outlook implies early-year strength.
Negative Updates
Tariff Headwinds and Margin Pressure
Incremental tariff expense of ~$34 million in 2025 (impacting consolidated gross margin by ~166 basis points) and an expected incremental ~$40 million in tariffs for 2026 (cumulative ~$75 million gross impact versus 2024), contributing to quarterly and annual gross margin compression (Q4 gross margin declined 220 basis points to 37.4%).
Adjusted EBITDA and Quarterly Profitability Decline
Full-year adjusted EBITDA declined to $222 million (down $39 million year-over-year); Q4 adjusted EBITDA was negative $25 million (down $30 million year-over-year), with Q4 results impacted by $12 million incremental tariff expense and a $19 million increase in annual incentive compensation.
Sales and Soft Goods Pressure
Consolidated net sales down slightly for the year; fourth quarter consolidated sales of $368 million decreased ~1% year-over-year; full-year soft goods segment declined 1.4% due to soft global market conditions.
Planned Revenue Headwinds from Strategic Mix Changes
Management plans to pull back on lower-margin categories/channels, reduce closeout/off-price sales and alter launch cadence and product life cycles; company expects these changes to negatively impact revenues in 2026 (particularly in the second half) while aiming to improve long-term margins and profitability.
Lower Dividend Income and Short-Term EBITDA Impact
Use of transaction proceeds to pay down debt reduced cash balances and is expected to lower dividend income by approximately $16 million in 2026 versus 2025, contributing to the adjusted EBITDA decline.
Compensation and One-Time Expense Timing
Operating expenses increased modestly (1% year-over-year), but Q4 operating expenses rose $19 million driven by annual incentive compensation timing (lapping a reversal in the prior year), which weighed on quarterly profitability.
Near-Term Uncertainties
External risks include higher consumer price points driven by tariffs (~$40M incremental), softer-than-desired consumer confidence and job growth, and dependency on product reception during peak selling seasons (some new products had not launched at time of call).
Company Guidance
Callaway guided 2026 full‑year revenue of $1.98–$2.05 billion and adjusted EBITDA of $170–$195 million, with CapEx expected at $35–$40 million and approximately $100 million of free cash flow, and said gross margins should be roughly flat despite incremental tariffs of about $40 million in 2026 (≈$75 million vs 2024) and roughly $16 million less dividend income; Q1 revenue is forecast at $635–$665 million (≈+3% y/y at the midpoint) with Q1 adjusted EBITDA of $110–$125 million, including an incremental $24 million of tariff expense in Q1 and the lapse of a $12 million lease termination benefit from Q1 2025. Management reiterated priorities to reinvest, maintain a healthy balance sheet and return capital (including a $200 million share repurchase program), expects to remain net cash to 0 net leverage in 2026, and noted that as of Jan 2, 2026 the company had about $680 million of cash, ~$480 million of outstanding debt (including $258 million of convertibles and $166 million of term debt) and plans to settle the ~$250 million convertible due May 2026 in cash.Callaway Golf Financial Statement Overview
Summary
Income statement and cash flow are weak (TTM revenue growth -1.91%, negative profit/EBIT margins, and free cash flow growth -87.49%), partly offset by a strong gross margin (64.55%) and some balance-sheet leverage improvement (debt-to-equity 0.78).Income Statement
Topgolf Callaway Brands has experienced declining revenue growth in recent periods, with a negative growth rate of -1.91% in the TTM. The company also faces challenges with profitability, as evidenced by negative net profit and EBIT margins. However, the gross profit margin remains relatively strong at 64.55%, indicating efficient cost management at the production level.45
Neutral
Balance Sheet
The company's debt-to-equity ratio has improved to 0.78 in the TTM, indicating a reduction in leverage compared to previous years. However, the return on equity remains negative, reflecting ongoing profitability challenges. The equity ratio is stable, suggesting a balanced asset structure.50
Neutral
Cash Flow
Cash flow performance is weak, with a significant decline in free cash flow growth of -87.49% in the TTM. The operating cash flow to net income ratio is low, indicating challenges in converting earnings into cash. The free cash flow to net income ratio is also low, reflecting limited cash generation relative to net losses.40
Negative
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 4.06B | 4.24B | 4.28B | 4.00B | 3.13B | 1.59B |
| Gross Profit | 2.57B | 2.65B | 2.65B | 2.41B | 1.86B | 656.56M |
| EBITDA | -985.60M | -973.60M | 484.70M | 477.50M | 622.00M | -5.69M |
| Net Income | -1.50B | -1.45B | 95.00M | 157.90M | 322.00M | -126.93M |
Balance Sheet | ||||||
| Total Assets | 7.57B | 7.64B | 9.12B | 8.59B | 7.75B | 1.98B |
| Cash, Cash Equivalents and Short-Term Investments | 865.60M | 445.00M | 393.50M | 180.20M | 352.20M | 366.12M |
| Total Debt | 3.18B | 4.14B | 4.07B | 3.57B | 4.48B | 1.07B |
| Total Liabilities | 5.09B | 5.23B | 5.24B | 4.82B | 4.06B | 1.30B |
| Stockholders Equity | 2.48B | 2.41B | 3.88B | 3.77B | 3.68B | 675.64M |
Cash Flow | ||||||
| Free Cash Flow | 33.50M | 83.40M | -118.10M | -570.60M | -44.00M | 188.98M |
| Operating Cash Flow | 313.40M | 382.00M | 364.70M | -35.10M | 278.30M | 228.24M |
| Investing Cash Flow | 30.70M | -297.30M | -542.90M | -535.10M | -161.90M | -59.21M |
| Financing Cash Flow | 76.20M | -23.60M | 375.80M | 425.30M | -124.10M | 96.07M |
Callaway Golf Technical Analysis
Neutral
13.79
Price Trends
13.63
Positive
11.94
Positive
10.25
Positive
Market Momentum
-0.03
Positive
47.41
Neutral
47.53
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CALY, the sentiment is Neutral. The current price of 13.79 is below the 20-day moving average (MA) of 14.29, above the 50-day MA of 13.63, and above the 200-day MA of 10.25, indicating a neutral trend. The MACD of -0.03 indicates Positive momentum. The RSI at 47.41 is Neutral, neither overbought nor oversold. The STOCH value of 47.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CALY.
Callaway Golf Risk Analysis
Callaway Golf disclosed 70 risk factors in its most recent earnings report. Callaway Golf reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Callaway Golf Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $2.22B | 31.66 | 13.53% | 0.79% | 7.27% | 45.12% | |
70 Outperform | $5.87B | 27.37 | 25.91% | 1.15% | 4.20% | 24.12% | |
67 Neutral | $3.54B | 21.98 | 23.79% | ― | 1.56% | -17.21% | |
66 Neutral | $522.34M | -23.14 | -7.78% | 3.22% | -0.07% | -31.45% | |
62 Neutral | $2.52B | -43.52 | ― | ― | -3.58% | -12720.97% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
52 Neutral | $401.27M | -5.00 | ― | ― | -3.55% | -111.90% |
* Consumer Cyclical Sector Average
CALY
Callaway Golf
13.79
7.27
111.50%
GOLF
Acushnet Holdings
99.49
35.43
55.31%
JOUT
Johnson Outdoors
51.04
24.83
94.71%
YETI
Yeti Holdings
44.74
9.12
25.60%
OSW
OneSpaWorld Holdings
21.82
3.40
18.47%
XPOF
Xponential Fitness
8.23
-4.72
-36.45%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.