Jefferies Tees Up These 2 Golf Retailers

ELY and GOLF could be driven higher by the growing golf craze

by Patrick Martin

Published on Apr 18, 2019 at 10:06 AM

Following Tiger Woods' historic Masters win last Sunday, Jefferies weighed in on golf retailers Callaway Golf Co (NYSE:ELY) and Acushnet Holdings Corp (NYSE:GOLF). The brokerage firm noted the growing golf trend is not just because of the return of 'Tiger-mania.' Said analyst Randal Konik, on-course golf participants grew in 2018 for the first time in 14 years, and thinks equipment retail specialists will stand to benefit. He added, "for those who view the sport of golf as 'dead,' we believe this should serve as a potent correction." 

At last check, Callaway stock was down 0.5% to trade at $17.11, on track to snap a four-day winning streak. ELY got an immediate boost from Tiger and the Masters, yet the overhead $18-$19 neighborhood still looms as resistance. A short squeeze could help the shares test that ceiling, though. Short interest fell by 4% in the most recent reporting period, yet the 7.48 million shares sold short still represents 8.5% of ELY's total available float and 9.3 times the average daily trading volume.

Looking at Acushnet, the stock was trading right breakeven at $25.34, with its seventh straight win in jeopardy. The shares are staring up at resistance at the $25.50 level, a price point that stifled a breakout back in late February.

Should GOLF stay hot, it might get a boost from a shift in analyst sentiment. Of the 12 brokerages covering the security, seven rate it a tepid "hold," while its average 12-month price target of $26.15 is now a discount to its current perch. Acushnet could also get tailwinds from shorts covering. Almost 12% of GOLF's float is sold short, and at average daily trading volumes, it would take shorts almost 30 days to buy back their bearish bets.

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