What happened
Sometimes, confirming investors' worst fears is enough to send a stock sharply lower, and that's exactly what we saw with shares of Topgolf Callaway (MODG 0.45%) this week. First-quarter earnings were fine, but a small change in guidance sent shares lower.
According to data provided by S&P Global Market Intelligence, shares of Topgolf Callaway fell as much as 24% this week and closed the week down 22.8%.
So what
Revenue was up 12.2% to $1.17 billion, but net income dropped 71.2% to $25 million, or $0.13 per share. Management said that investments in operating expenses led to the drop in earnings, partly due to the cost of building 11 new Topgolf facilities this year.
Management did update guidance, and that seems to be what investors grabbed onto. The bottom end of revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) guidance were increased by $5 million, with the revenue range now at $4.42 billion to $4.47 billion and adjusted EBITDA at $315 million to $325 million. But the same venue sales guidance was reduced from "high single digit %" growth to "mid-to-high single digit %" growth, and that was enough to send the stock lower.
Now what
The comments around lower guidance were largely understandable, as companies spend less on corporate events at locations like Topgolf. But that's going to hit results, and investors didn't like to hear it.
On the plus side, Topgolf will open 11 new locations this year, and eight will open in the fourth quarter. So 2024 looks like another solid growth year. For long-term investors, this dip looks like a buying opportunity.
