3 Reasons to Play ELY

Written by GSCR Staff   
Thursday, 10 October 2013 08:03

In Monday’s Goldman Guide the number 1 item on our list for the market right now is to stand tall, invest small.  It may be time to consider longer term investments with the market in turmoil currently over the Washington fiasco.

Additionally, we mentioned Callaway Golf Company (NYSE – ELY - $7.12) in our list at number 4, as a possible play on the steadily rebounding and growing golf industry.  We highlighted the stock back in the early spring at it is up a modest 4.7%.  Clearly the stock is priced right, and Callaway is a diverse manufacturer of top brand golf clubs, balls, and other equipment that is set to capitalize on the growing industry. 

Here are three additional reasons to buy or keep what you already have

  1. Our recipe for success in the market right now looks to be intact for ELY.  The charts indicate a very bullish signal in all time durations for the DMA.  Additionally, Callaway is expected to be profitable from an EPS perspective next year.  Finally, the stock is up over 6% on an average of nearly 600,000 shares traded per day over the last three months, which is a nice momentum indicator.
  2. Several global and domestic macroeconomic factors indicate that the golf industry is set for a rebound in the U.S. and other established economies and for a growth spurt in emerging markets.  Several leading market research firms indicate that the CAGR for equipment retail sales will be 3 – 4% in the U.S. and Europe and 5-6% in China, Brazil and other emerging markets through 2016. Additionally, 10,000 people in U.S. retiring each day and golf is an increasingly popular recreation activity among the 65 and older crowd.
  3. The PGA and USGA have concentrated and expansive initiatives to grow the game.  “The First Tee” is an effort to bring the game to less affluent younger players.  Additionally, “Tee it Forward” and “Play 9” are ways the governing bodies are trying to speed up the game and make it more accessible for everyone.

Again, ELY may be a longer term play as growth is expected at a slow pace.  Look for a value of $10.00 sometime next year though.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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