ELY Analyst is Bullish on TopGolf Investment

The Raymond James note said ELY's TopGolf stake is not being reflected in the stock price

by Josh Selway

Published on Sep 11, 2019 at 10:35 AM

Callaway Golf Co (NYSE:ELY) is trading 3.6% higher this morning after a bullish analyst note. Specifically, Raymond James pointed out that ELY's stake in TopGolf was worth around $290 million in 2017, a value not reflected in the current stock price. The analyst note suggests Callaway could look to cash out of this investment to fund future business efforts, especially since more than 9% of the float is controlled by activist Jana Partners. The security's rating was raised to "outperform" from "market perform," and Raymond James set a price target of $21.

ELY stock was last seen at $18.94, set up for its best finish since November. The shares are up 23.6% in 2019, and most analysts have been rightly bullish. Of the 12 brokerages in coverage, nine consider the equity a "strong buy."

Near-term options traders were well-positioned for a move higher it would seem. This is according to the Schaeffer's put/call open interest (SOIR) of 0.15, coming in at the lowest annual percentile. Said simply, traders targeting options that expire within three months are unusually call-heavy right now. Peak open interest resides at the October 19 call, and the September 17 call is right on its tail, with the strikes home to 3,394 and 3,356 contracts, respectively.

Not everyone is sold on ELY shares, though. Short interest accounts for almost 14% of the float, and it would take bears nearly nine sessions to cover, based on average daily trading volumes. Considering this alone, traders should pay attention to a potential short squeeze on Callaway Golf.

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