NEW YORK (AP) -- Callaway Golf shares declined Wednesday as an analyst cut the company's rating and price target, saying that aggressive promotions by one of its rivals will probably hurt full-year sales and margins.
THE SPARK: Rommel Dionisio of Wedbush cut Callaway Golf Co. to "Neutral" from "Outperform" and reduced its price target to $7 from $8.
THE ANALYSIS: Dionisio said in a client note that golf club maker TaylorMade has been promoting heavily, taking $50 to $100 off its R1 driver, its RBZ Stage 2 driver and its RocketBladez irons. This is pressuring the near-term market share of Callaway.
Dionisio said that TaylorMade and other golf club companies likely started discounting prices early in the golf season because of bad weather in March and early April that kept players away from golf stores and courses.
Dionisio said that Callaway responded quickly to the promotions. This past weekend it started offering $50 rebates for the next three weeks on its XHot, XHot Pro and RAZR Fit Extreme drivers.
The analyst said he lowered 2013 and 2014 estimates for Callaway because of the market share pressure and expenses tied to running its own promotions. Dionisio now anticipates a 2013 loss of 12 cents per share and 2014 earnings of 16 cents per share. He previously predicted a 2013 loss of 4 cents per share and 2014 earnings of 25 cents per share.
A representative for Callaway did not immediately respond to an email seeking comment.
SHARE ACTION: Down 22 cents, or 3.1 percent, to $6.86 in afternoon trading. The shares have traded between $5.20 and $7.30 over the last year.
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