The Master’s Starts Golf Season, Kick Starts Callaway Golf

Written by GSCR Staff   
Wednesday, 06 April 2016 06:53

As we have opined a lot over the past few years, we are in the midst of one of the best times of the year for sports fans. Monday’s NCAA championship game could not have put a better cap on March Madness. Major League Baseball is now underway. The Kentucky Derby kicking off the horse racing Triple Crown is just over a month away. Finally, Master’s week is here, the first major of the season for golf, and what is considered the unofficial start of golf season for all of us weekend hacks.

Below is the two year chart for Callaway Golf Company (NYSE – ELY - $9.03) which illustrates that the stock is now above the 200-day EMA drawn on the chart. It can be observed that the stock has also had several head and shoulders patterns over this period making it a solid trading vehicle.

ELY 2-Year, 200-Day EMA

(Source: www.otcmarkets.com)

MM.04.06.16.ELY-2yr-200ema

In a purely esoteric explanation, we like ELY because golf is now getting some stars again as Tiger Woods and Phil Mickelson fade into the sunset. Some experts believe the field in these events is the deepest it has ever been. The game needs stars to be popular and sell merchandise. More concretely, the forward P/E is 25, half the trailing P/E of 53 on Wall Street forecasts’ for revenue of $870 million this year versus $843 in 2015. Additionally, the Company’s gross margin of 6% is double the industry average of 3%. Also total cash of nearly $50 million versus debt of only $15 million is another positive sign. Finally, back to the technical front, a short float of 2.5% is indicative of the plethora of believers out there.

We like a pop for ELY over the next six months or so as golf season hits full stride. Look for a target of $12. Fore!

Have a great day!

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