Callaway Golf (ELY) is Jefferies' Top Pick as Golf Activities are Accelerating

Jefferies analyst Randal Konik reiterated Callaway Golf Company (NYSE: ELY) as a top pick given that the sport of golf is accelerating while the “brand of Callaway is very strong and getting stronger”.

Following the year of pandemic, a higher number of people are looking to spend more time outside. Golf is also benefiting from warm weather in winter months,” according to the management of Dicks Sporting Goods (DKS).

“DKS mgmt noted that trends they see indicate a more permanent shift in consumer behavior towards activities in the great outdoors. This is based on the growth in new customers, repeat purchase behavior of existing customers, and category trends,” Konik wrote in today’s note.

Dicks specifically mentioned fitness and golf as accelerating trends. The company’s data shows a strong demand for good golf equipment with ELY as top pick due to its flagship stick products.

“DKS added 2M new customers in the quarter. While not mentioning golf related customers in particular, we know that golf rounds played are up big, golf equipment purchases are up big and golf lessons are up big.”

The management said that inventory is in good shape and they’re looking to “chase” in areas of strength.

“Management cited 3 brands they will expand their partnership with (Callaway, Nike, North Face) as these brands represent key "differentiation" in their respective categories. Bottom line... DKS will order more from ELY ahead.”

Overall, Konik believes that ELY shares are “going much higher, as core Callaway will remain strong and Topgolf expands company dominance across a powerful golf ecosystem.”

He rates the company as “Buy” with a price target set at $30.00 per share.

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