Callaway Golf Stock (NYSE:MODG): PGA

Shares of Callaway Golf Stock (NYSE:MODG) gained 5.5% on June 6, following the surprise merger announcement between sworn enemies, the PGA Tour and LIV Golf. Both PGA and LIV, along with the third partner, the DP World Tour, are set to form a new entity. Topgolf Callaway Brands, which manufactures and distributes golf equipment and accessories, is expected to be a major beneficiary of the merger since the promotion of the game will ensure higher demand for its products.

Following the news, analyst Eric Wold of B. Riley Financial reiterated a Buy rating on MODG and maintained the price target of $31, which implies an impressive 60.6% upside potential from current levels.

Wold believes the combination of these entities would result in boosting the awareness of the sport as well as increase the popularity "for the various brands operated by MODG." Plus, MODG will have its Topgolf logos on players’ clothing. The game will also increase demand for Callaway equipment from players who win events, as well as promote MODG's TravisMathew clothing line.

PGA Tour has been one of the major players in the traditional golf arena, while LIV, backed by Saudi Arabia's Public Investment Fund (PIF), has faced challenges in gaining significant traction despite attracting top golfing talent. While PGA has more of a conventional approach, LIV has new and relaxed event formats and atmospheres. The combining of these entities will ensure global reach in the golfing arena.

Since its launch, LIV Golf has poached several of the PGA's renowned golfers by throwing hundreds of millions of dollars in payments. The PGA even filed a complaint against Saudi-backed LIV Golf, and the two entities are currently engaged in a legal battle. The deal would resolve all the pending litigation, bringing back a lot of enthusiasm for the commercial game.

On TipRanks, Callaway Golf commands a Strong Buy consensus rating based on nine Buys and two Hold ratings. The average Callaway Golf stock prediction of $31.36 implies 62.5% upside potential from current levels. Meanwhile, MODG stock has lost nearly 2% so far in 2023 vis-à-vis losing 15.5% in the past year.

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