On Thursday, Topgolf Callaway Brands (NYSE: MODG) saw its price target increased by Goldman Sachs (NYSE:GS) to $15.00, up from the previous $14.00, while the firm retained a Neutral stance on the stock. Topgolf Callaway reported first-quarter 2024 sales of $1,144 million, falling short of the $1,160 million and $1,157 million expected by Goldman Sachs and consensus estimates, respectively. However, the company's adjusted EBITDA of $161 million surpassed the Street's projection of $138 million.
The company has revised its full-year 2024 guidance due to several factors. It now anticipates greater foreign exchange headwinds, elevated inventory levels, and challenging market conditions in Europe, particularly affecting its Jack Wolfskin business. Despite these challenges, Topgolf Callaway has raised its earnings per share (EPS) forecast to a range of $0.31 to $0.39, up from the previous range of $0.26 to $0.34. Nevertheless, the adjusted EBITDA outlook remains unchanged at $620 million to $640 million.
Goldman Sachs acknowledged the headwinds faced by Topgolf Callaway but noted positive developments within the company. While Topgolf's operational improvements and gains in market share within the Golf Equipment segment were recognized, the firm believes that broader macroeconomic conditions will likely suppress demand in the fiscal year 2024.
In their commentary, Goldman Sachs expressed a cautious but optimistic view of Topgolf Callaway's adjustments and performance. "While we are encouraged with Topgolf's operational improvements and market share gains in Golf Equipment, we think the overall macro will keep demand muted in FY24. Our updated target price is $15 (vs. $14 prior)," stated the firm, indicating a slight increase in confidence in the company's valuation, while maintaining a watchful eye on market dynamics.
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