Topgolf Callaway Brands Corp

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Topgolf Callaway Brands Corp. (NYSE: MODG) is a golf and active lifestyle company. The Company provides golf entertainment experiences, designs, and manufactures golf equipment, and sells golf and active lifestyle apparel and other accessories through its family of brand names, which include Topgolf, Callaway Golf, Odyssey, TravisMathew, Jack Wolfskin, OGIO, Toptracer and World Golf Tour. Its segments include Topgolf, Golf Equipment, and Active Lifestyle.

Kalkine’s Diversified Opportunities Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.

Stock Performance:

• The stock has corrected by 31.15% in the last three months, similarly a correction of 22.42% in past six months.
• The stock is in its higher band of its 52-week range of USD 17.40 and 52-week low price of USD 9.84. Post the announcement of Q2FY24 results the stock has corrected by approx. 23.36% correction, with the current price inside an important support zone of USD 10.00-USD 11.00.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 35.31.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Top 10 shareholders:

The top 10 shareholders together form ~60.74% of the total shareholding, signifying concentrated shareholding. Providence Equity Partners LLC., and BlackRock Institutional Trust Company, N.A. are the biggest shareholders, holding the maximum stake in the company at 11.54% and 11.45%, respectively.

1.4 Key Metrics

Between 2019 and 2023, the company exhibited remarkable financial growth, with revenues increasing at a compound annual growth rate (CAGR) of 28.08%, rising from USD 1,701.1 million to USD 4,284.8 million. Concurrently, gross profit expanded at a five-year CAGR of 35.62%, from USD 766.8 million to USD 2,654.1 million. The company's gross margin improved from 45.08% to 61.94%, highlighting its strong cost management and operational efficiency. These metrics reflect the company's significant market presence and profitability. In Q1 FY2024, MODG achieved a gross margin of 60.3%, surpassing the industry median of 42.9%, indicative of superior cost control and pricing strategies. MODG's EBITDA margin for the same period stood at 12.2%, marginally above the industry median of 11.8%, further underscoring its operational effectiveness and ability to generate profitability above industry standards.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

2.2 Insights of Q2FY24:

Section 3: Key Risks & Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

Stock Performance:

• The stock has corrected by 31.15% in the last three months, similarly a correction of 22.42% in past six months.
• The stock is in its higher band of its 52-week range of USD 17.40 and 52-week low price of USD 9.84. Post the announcement of Q2FY24 results the stock has corrected by approx. 23.36% correction, with the current price inside an important support zone of USD 10.00-USD 11.00.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 35.31.

 4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is September 04, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.