MODG

Topgolf Callaway($MODG) CEO and Director Snatch Up 50,000 Shares Following 57% Stock Plunge

05/16/2025 10:31

Topgolf Callaway Brands Corp. ($MODG) has seen significant insider buying following a steep stock decline, with both the CEO and a director making substantial purchases. According to SEC filings on May 15, CEO Oliver Brewer III acquired 20,000 shares worth approximately $126,797 at an average price of $6.34 per share on May 14, while Director Russell Fleischer purchased 30,000 shares for about $192,450 at an average price of $6.42 on the same day. This insider activity comes as $MODG shares have plummeted nearly 57% over the past year. The stock has dropped dramatically from the mid-$15 range in June 2024 to around $6 currently, hitting $6.55 on May 13 before slightly rebounding to $6.62 by May 15. Notably, these insider purchases occurred immediately following the company's Q1 2025 earnings release. On May 12, $MODG reported quarterly revenue of $1.09 billion (down 4.5% year-over-year) but delivered earnings per share of $0.11, significantly outperforming analyst expectations of a $0.06 loss. This suggests the company is improving cost efficiencies despite challenging market conditions. $MODG is currently at a strategic inflection point. In September 2024, the company announced plans to separate into two independent entities: Topgolf and Callaway. Then-CEO James Lico stated that "this business, on a stand-alone basis, will be well understood and valued by the market." The spin-off is planned as a tax-free transaction aimed at unlocking the value of each business segment more explicitly. As a leading company in golf equipment manufacturing and entertainment, $MODG operates through three primary segments: Topgolf, Golf Equipment, and Active Lifestyle. However, recent financial performance has been mixed. For the full year 2024, the company reported a net loss of $1.45 billion, a stark decline from a profit of $95 million in the previous year. Breaking down by segment, the Q1 2025 results show Topgolf segment revenue decreased to $393.7 million (down 6.8% YoY) with an operating loss of $11.9 million. The Golf Equipment segment saw revenues slightly decrease to $443.7 million (down 0.3% YoY), but operating income improved to $101.6 million. The Active Lifestyle segment revenue dropped to $254.9 million (down 4.7% YoY). Currently, $MODG has a market capitalization of approximately $1.16 billion, placing it in the small-cap category. From a valuation perspective, the stock appears significantly undervalued with a price-to-sales ratio of 0.29 and a price-to-book ratio of 0.50. This perceived undervaluation prompted Jefferies to upgrade the stock to 'buy' from 'hold' in January 2025, raising the price target to $13. However, the company's debt levels remain a concern. With a debt-to-equity ratio of 182.68%, $MODG carries substantial leverage that could pose risks in a rising interest rate environment or economic downturn. Cash holdings have also decreased to $317 million as of March 2025, down from $445 million at the end of 2024. Looking at the broader market context, early 2025 saw U.S. markets struggle with inflation concerns and tariff policies from the Trump administration. However, recent developments, including a 90-day pause on reciprocal tariffs between the U.S. and China, have led to a recovery in the S&P 500. Despite this market recovery, $MODG shares have failed to participate in the broader market rally. In this context, the substantial purchases by the CEO and director signal strong confidence in the company's current valuation. Oliver Brewer III, in particular, is a respected figure in the golf industry, and his buying decision may be interpreted as a positive signal to the market. Looking ahead, $MODG forecasts Q2 revenues between $1.075 billion and $1.115 billion and adjusted EBITDA between $139 million and $159 million. For full-year 2025, revenue guidance stands at $4 billion to $4.19 billion, though same-venue sales growth expectations have been revised downward. Investors should monitor the progress of the separation plan, the effectiveness of cost-cutting initiatives, and performance improvements across business segments. The recovery of growth in the Topgolf segment and the sustained profitability of the Golf Equipment division will be particularly important factors to watch.

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