Topgolf Callaway Brands Corp. and Acushnet Holdings Corp. climbed after the shock announcement that the PGA Tour will merge with Saudi-backed rival LIV Golf, with Jefferies projecting the deal will drive more interest in golf.
Topgolf, which makes golf equipment and operates a chain of high-tech driving ranges, gained as much as 6.5% in the biggest intraday advance in nearly seven months. Golf gear peer Acushnet rose as much as 5.7%.
“The recent announcement has undoubtedly caught the golf industry by surprise,” Jefferies analysts led by Randal Konik wrote in a note to clients. “However, we believe that this unexpected agreement holds immense potential to elevate the sport of golf to new heights.”
Jefferies anticipates that the merger will enable a pooling of resources, capital and expertise that will help draw more attention to the sport. The combination also includes the DP World Tour, formerly known as the European Tour.
“The global nature of this collaboration creates a more vibrant golfing landscape attracting new players, sponsors and fans which will inevitably fuel growth for golf OEMs, in our view,” noted the analysts, referring to original equipment manufacturers.
The deal comes after Topgolf’s outlook cut last month stoked concern that interest in golf is cooling following a pandemic-fueled surge. Even with Tuesday’s jump, Topgolf shares remain down about 2% this year. Acushnet, meanwhile, has gained 15% so far in 2023.
Jefferies rates Topgolf buy with a $56 price target and Acushnet hold with a $51 price target.