Titleist Trades Below Peer Set; Jefferies Starts At Buy

Jefferies believes Acushnet Holdings Corp GOLF ("Titleist")* should benefit from a stabilizing golf industry that would result in steady growth for the company via market share gains, loyal customer base and high consumables penetration.

Acushnet, which makes golf products, recently came out with 19.33 million shares through IPO at a price range of $21.00–$24.00. The company priced its shares at $17.00, much below the indicated price.

“We see several demographic tailwinds fueling the golf industry, including the 76 million baby boomers entering retirement (and planning to play more golf) and improving participation from beginner/junior golfers,” analyst Randal Konik wrote in a note.

Justification For Buy Initiation

Konik, who launched the coverage of Acushnet shares with a Buy rating and $25 price target, expects Acushnet to maintain its market-leading positions, given its industry-leading number of patents, ongoing investments in R&D and vertical integration.

In addition, the company’s earnings are more stable as it generates more than 40 percent of sales from balls (consumables) versus peers who rely heavily on discretionary club items.

“We see Acushnet's already-strong fundamentals continuing to improve as it builds on its market-leading position to drive the top-line, while generating margin improvement through ASP increases, scale and manufacturing efficiencies, and cost leverage,” Konik added.

Further, the analyst expects the stock to be driven by multiple expansion as it trades below its peer set.

Shares of Acushnet closed Monday’s trading at $19.02. The $25 target implies potential upside of 31 percent.