Acushnet Holdings, Inc. (NYSE: GOLF) - Buy recommendation.
The quiet period for the Acushnet IPO is scheduled to expire on Nov. 22, 2016. This will allow the IPO underwriters to release their analyses and reports on Nov. 23, 2016 for the first time since the company began trading publicly. Research has found an uptick in stock price around the end of a company's quiet period, resulting from the flood of (typically) positive reports released to the market.
The underwriting team for Acushnet Holdings is comprised of a powerful and far-reaching group of firms, including: JP Morgan, Morgan Stanley, Nomura and UBS Investment Bank. We expect these firms will be eager to release positive reports upon the quiet period expiration, building on several of the firm's highlights so far.
Our own firm has studied movement around quiet period expirations and found above market returns between day (-5, +2), with day (0), being the quiet period expiration date (in this case, 11.22).
Acushnet Holdings is a Massachusetts-based company that manufactures and sells golf products around the world. Its two most recognizable brands are Titleist and Footjoy. It operates through four main divisions, including: Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and Footjoy Golf Wear. The U.S. market is the company's main source of revenue, accounting for 54 percent of its sales. Europe accounts for 13 percent, the Middle East and Africa account for 12 percent and Japan accounts for 10 percent of the company's worldwide sales. Acushnet Holdings owns or controls the design, manufacturing, and distribution of all products. We included an in-depth overview of the company when we first featured it ahead of its IPO.
Financial highlights and risks
For the year that ended on Dec. 31, 2015, Acushnet reported net revenues of $1.503 billion, which was a 2.3 percent decline from the revenues it reported for the year ending on Dec. 31, 2014. The company also reported a net loss of $966,000 for 2015. Declining revenue for the company was a result of tough market conditions for the golfing industry. According to Golf Digest, sales of both woods and irons were down by 15-20 percent over the last couple of months. As a result of the tough market conditions, a number of players have dropped out of the golf equipment business. Nike (NYSE: NKE) recently stopped selling golf equipment in August after it reported years of declining sales for golf clubs and balls. In addition, Adidas has been in search of a buyer for its golf-equipment focused brands, including: TaylorMade, Adams, and Ashworth since May.
Executive management overview
Walter Uihlein has served as CEO and President of Acushnet since 1995 and has worked for the business since 1976.
David Maher is the COO of Acushnet Holdings and was appointed to that role in June 2016. He has worked for the company since 1991, serving in a variety of different roles.
Performance since its IPO
Acushnet Holdings made its market debut on October 27, 2016. We previewed the company ahead of its IPO and at the time recommended investors avoid it because of the company's declining revenues and the difficult market for golf manufacturing businesses. We were also cautious given company insiders were selling 100% of the shares and that Fila Korea would have majoring voting power post-IPO.
Despite our initial concerns, the IPO fared well. The company raised $329, offering 19.3 million shares at $17 per share. Since its IPO, the stock price has moved above that amount, ranging from $16.90 to $18.75. During the trading day on Thursday Nov. 17th, the company was trading at $18.75.
Conclusion: Short Term Buy for Experienced Investors
While we recommended that long-term investors remain cautious on Acushnet Holdings, we see an excellent opportunity for event-driven investors.
We expect a 2-5% increase over an approximate week-long period, which is in-line with what we have found in past research.
We expect Acushnet's strong team of underwriters to be eager to release positive reports post quiet period.
The event itself, along with investor anticipation, could drive the stock price up.
We recommend investors consider purchasing a modest allocation ahead of the expiration in order to benefit from this expected temporary uptick.
Disclosure: I am/we are long GOLF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.