On Thursday, JPMorgan (NYSE:JPM) analyst Kevin Heenan downgraded Acushnet Holdings Corp (NYSE:GOLF), the parent company of Titleist golf balls and FootJoy shoes, from Neutral to Underweight. He also revised the price target for the stock to $64.00 from an unspecified previous target. Currently trading at $74.60 and near its 52-week high of $76.65, InvestingPro analysis suggests the stock is overvalued at current levels. This adjustment reflects a more conservative outlook on the company's revenue projections for the fiscal year 2025.
Heenan cited a revision in the revenue forecast, setting it to flat year-over-year growth on a reported basis. This estimate falls below the consensus expectation of a 4.5% increase year-over-year. The company's recent performance shows modest growth, with revenue increasing just 0.35% over the last twelve months. The new forecast includes a 2.0% growth in constant currency terms, which is affected by a predicted foreign exchange headwind of approximately 200 basis points, translating to a $50 million impact according to JPMorgan's model. Acushnet's international revenue, which makes up about 43% of the total, is primarily derived from Europe, the Middle East, Africa, Japan, and Korea.
The downgrade takes into account the geopolitical and macroeconomic issues in Korea, which is a significant market for Acushnet, contributing around 10% to the company's revenues. These factors could pose additional risks to JPMorgan's projections. Heenan's analysis compares the expected constant-currency revenue growth for fiscal year 2025 to Acushnet's pre-pandemic odd-year constant-currency revenue growth average of 2.7%.
The new price target is based on an 11.4 times multiple of the firm's projected fiscal year 2026 EBITDA, aligning with Acushnet's three-year and five-year trailing average. The company currently trades at an EV/EBITDA multiple of 15.84x and a P/E ratio of 25.36x. Despite these elevated multiples, InvestingPro data shows the company maintains good financial health with strong profitability metrics and moderate debt levels. Get access to over 30 additional key metrics and 12 exclusive ProTips for Acushnet Holdings with an InvestingPro subscription, including detailed valuation analysis and comprehensive Pro Research Reports.
In other recent news, Acushnet Holdings Corp. has agreed to a $62.5M share buyback with Magnus Holdings Co., Ltd., as part of its existing $1.0 billion share repurchase authorization. This move is a strategic effort by Acushnet to manage its capital allocation and deliver value to its shareholders. The repurchase agreement follows Acushnet's recent growth in its third quarter of 2024, driven by a 19% increase in Titleist Golf Club sales. The company reported a 5% rise in net sales, reaching $621 million, and a 9% increase in adjusted EBITDA to $107 million compared to the same period last year. However, Titleist Golf Ball (NYSE:BALL) sales experienced a slight decrease of 1%. Acushnet also announced the transition of FootJoy footwear production to a new facility in Vietnam. These recent developments show Acushnet's ongoing efforts to adapt to market conditions and streamline its operations.
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