Golf Stocks Slip After Callaway (ELY) Flags Supply Issues

Despite trouncing Wall Street’s quarterly earnings and revenues forecasts, Callaway Golf Company (ELY) shares eased Monday after the company cautioned about supply chain issues.

The golf equipment maker, which recently merged with global sports entertainment company Topgolf, posted a second quarter (Q2) adjusted profit of 36 cents per share, easily driving past analysts' expectation of a penny loss per share. Revenues of $913.64 million also trumped forecasts and surged 208% compared to the pandemic-ravaged June 2020 quarter on the back of robust demand for golf equipment as more people returned to the fairways.

Key Takeaways

  • Callaway Golf (ELY) shares fell after the company cautioned about near-term supply chain challenges.
  • Look for Callaway shares to hold the $30 level, where the price encounters a confluence of support from a horizontal trendline and the 200-day simple moving average (SMA).
  • Acushnet (GOLF) shares find dual support at the $51.50 level from the 50-day SMA and a multi-month uptrend line stretching back to the March 2020 pandemic-induced low.

However, during the earnings call, CEO Chip Brewer cautioned investors about short-term supply chain constraints but said he was confident that the $5.86 billion company could manage the challenges, given the current demand for golf equipment and internal actions taken to mitigate the impact. Looking ahead, management sees the top line contracting slightly in the current quarter but coming in around $3 billion for the full year, comfortably ahead of sales reported in each of the two previous years. Callaway Golf stock has gained 32.15% year to date (YTD) but slipped around 6% since mid-May.

Callaway shares closed below the 50-day simple moving average (SMA) Tuesday, which could result in further short-term selling pressure. However, look for the bulls to defend the $30 level, where the price encounters a confluence of support from a horizontal trendline and the 200-day SMA. To help time an entry, make sure a retracement into this area coincides with the relative strength index (RSI) moving out of the oversold zone to confirm a shift in momentum.

Chart depicting the share price of Callaway Golf Company (ELY)

A support level refers to the price level that an asset does not fall below for a period of time. An asset's support level is created by buyers entering the market whenever the asset dips to a lower price.

Let's also take a closer look at Acushnet Holdings Corp. (GOLF), the company behind popular golf brands Titleist and FootJoy.

Acushnet Holdings Corp. (GOLF)

Earlier this month, the golf equipment manufacturer and distributor posted better-than-expected Q2 earnings of $1.08 per share on revenues of $624.85 million. This compares to earnings of 3 cents per share on sales of $300 million in the year-ago quarter. Each of the company's four segments—Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear, and FootJoy Golf Wear—reported solid top-line growth, with FootJoy sales leading the way, jumping 129% year over year. Like Callaway, Acushnet noted that it had encountered a wide range of supply chain complexities but added that a healthy global golf market compared to the past two years had helped offset those challenges. Performance-wise, the stock offers a 1.22% dividend yield and is trading 32.91% higher since the start of the year as of Aug. 11, 2021. Over the past three months, the shares have added just over 5%.

After gapping to a lifetime high in early May, the price has traded mostly in a sideways trend as investors digested how supply issues might affect the stock. Those who've waited for a lower entry point should monitor the $51.50 level—an area on the chart the finds dual support from the 50-day SMA and a multi-month uptrend line stretching back to the March 2020 pandemic-induced low.

Chart depicting the share price of Acushnet Holdings Corp. (GOLF)

An uptrend describes the price movement of a financial asset when the overall direction is upward. In an uptrend, each successive peak and trough is higher than the ones found earlier in the trend.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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