Over the past few days, investors have not generally been willing to tee up with the stock of Topgolf Callaway Brands (MODG -1.98%). According to data compiled by S&P Global Market Intelligence, as of late Thursday, the golfing specialist’s stock was down by almost 13% week to date. News of an uninspiring quarter for the company was the driving factor in the decline.
A lousy day on the links
Topgolf unveiled its third-quarter results just after market close on Tuesday. Revenue for the period was slightly over $1.01 billion, a figure that was down 3% on a year-over-year basis. On the bright side, it topped management’s expectations and the consensus analyst estimate (albeit slightly), according to data compiled by Zack’s.
These dynamics were more pronounced on the bottom line, where Topgolf suffered a queasy 88% decline in adjusted net income. This landed at $4.3 million ($0.02 per share), against the year-ago quarter’s nearly $36 million profit. Yet the former topped the average pundit projection for an adjusted loss of $0.18 per share.
Topgolf was hit hardest by a more than 11% fall in revenue for active lifestyle — one of its three reporting segments — to $266 million for the quarter. Of the trio, only its Topgolf chain of video-enhanced golf practice venues booked a gain, and this was a minor 1% bump to $453 million.
Score adjustments
Management trimmed full-year guidance to $4.2 billion, the very low end of its previously anticipated range of $4.2 billion to $4.26 billion. It also downshifted its expectations for adjusted earnings per share to a range of $0.08 to $0.13. Formerly, it was expecting anywhere from $0.11 to $0.21.
Compounding Topgolf’s underwhelming performance and guidance adjustments, several analysts lowered their price targets on the stock. Among these was ever-influential investment bank Goldman Sachs, whose prognosticator Kate McShane reduced her price target on the shares to $12 from her previous $14. She maintained her neutral recommendation while doing so.
While Topgolf venues are fun places to spend time, golf isn’t a trendy sport for the most part. The company would benefit from a pickup in the sport’s popularity, but I don’t see that looming on the horizon.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Topgolf Callaway Brands. The Motley Fool has a disclosure policy.
