Callaway Golf Company (ELY) shares fell more than 8% after the company reported lower-than-expected fourth quarter financial results and issued weak guidance for the first quarter. Fourth quarter revenue rose 72.6% to $311.94 million, beating consensus estimates by $6.45 million, but non-GAAP earnings per share came in at -$0.26, missing consensus estimates by three cents. Management cited a lower-margin product mix, higher tariff expense, and the negative impact of currency exchange rates for the poor bottom-line results.
The company expects the coronavirus to have a negative impact on its first quarter and full-year results. In particular, management expects the coronavirus to cut $25 million from net sales and $13 million from adjusted EBITDA during the first quarter. While the company warned that it's difficult to estimate the impact, Callaway Golf still sees largely in-line full-year results.
Jefferies' analyst Randal Konik believes that Callaway Golf is a beneficiary of a stabilizing golf industry, but that's overshadowed by coronavirus-related disruptions that could curb near-term sales. While he lowered his price target to $26 per share, he maintains a Buy rating, believing that these risks are temporary, and he would be a buyer during the weakness.
From a technical standpoint, the stock fell to trendline and 200-day moving average support near $19.00. The relative strength index (RSI) fell to oversold levels of 28.33, but the moving average convergence divergence (MACD) remains bearish. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend is uncertain.
Traders should watch for a rebound from trendline support toward the middle of the stock's price channel or the 50-day moving average at $21.24 over the intermediate term. If the stock breaks down lower, traders could see a move to reaction lows near $16.50 over the intermediate term. The coronavirus uncertainty could cause a bearish outlook in the near term.
The author holds no position in the stock(s) mentioned except through passively managed index funds.