What happened

Shares of Callaway Golf (NYSE:ELY) rose 13% in December, according to data provided by S&P Global Market Intelligence, continuing their strong performance after a 37.3% rise in November.

Although there wasn't much new news in December, continued enthusiasm for Callaway and other "out-of-home" stocks pushed Callaway higher as we get closer to the wide distribution of a COVID-19 vaccine. That would especially benefit Callaway's new acquisition of Topgolf.

A golfer swings a club near a green as the sun sets.

Image source: Getty Images.

So what

Callaway's core golf club business had actually done quite well during the coronavirus pandemic, as golf is one of the few consumer discretionary leisure activities that can be done relatively safely today. Strong year-over-year growth in the quarter ended in September appears to have continued into the fourth quarter, with October rounds played up 32%, according to Golfdatatech.

In late October, Callaway decided to buy privately owned Topgolf, a large chain of deluxe driving ranges and entertainment centers. Unlike Callaway's main business, Topgolf was heavily affected by the pandemic, as it's a place where people gather closer together, with a restaurant and bar.

Although Callaway initially fell on the news, it appears it got a great deal. Topgolf had been in potential talks to go public via a SPAC last summer for as much as $4 billion before agreeing to be bought by Callaway for just $2 billion, or $2.5 billion including debt -- just before a COVID-19 vaccine proved safe and effective.

The combination of increased golfing and positive vaccine news caused analysts at B. Riley to raise their price target on Callaway from $25 to $29 in December. As of now, Callaway trades for $24.28.

Now what

It's hard to get a feel for Callaway right now, as we don't exactly know how successful Topgolf will be once the pandemic ends, and of course, when the pandemic will end. Still, it's quite possible that it may surprise to the upside, given aggressive targets put forth in management's presentation.

If golfing maintains its momentum after the pandemic ends, and consumers gravitate to Topgolf as it expands across the country, Callaway could still be a buy; however, there is a fair amount of uncertainty around both of those key factors right now.