Golf rounds played are slowing and that could be bad news for grass mowing stock Toro

Published Wed, Oct 27 20212:13 PM EDTUpdated Wed, Oct 27 20213:08 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

For investors looking to make a move in struggling mower stock Toro , it might be smart to give your local golf course a call before committing to a trade. Bank of America analyst Ross Gilardi downgraded the lawnmower maker to underperform from neutral, saying Wednesday in a note to clients that the stock was facing pressure on multiple key business areas — including golf. "On the pro side of the company, one of Toro's most important businesses is golf mowing, where it has close to 50% of the market and an excellent reputation. ... We're honestly not sure what to think about the sustainability of the golf market," the note said. Interest in golf surged during the pandemic, as Americans looked for ways to socialize outdoors. However, the golf boom is now slowing, with golf rounds played at private courses down 8% year over year in September, the bank said, citing the National Golf Foundation. Toro produces specialized golf equipment, including a fairway mower, and an irrigation business that should benefit from strong demand for golf courses. Toro's stock price shows a historical correlation with that metric, a chart from Bank of America shows. The exact cause of the decline in golf games is unclear, but it could be part of a greater normalization process, Bank of America said. "Golf rounds played have decelerated for the last four months. Some of this is weather-driven due to hurricanes and storms through the summer, but it could also be that individuals are slowly migrating back to the office, venturing out on vacations, going to ball games and concerts that are competing with their golf spend," the note said. The waning interest in golf is not the only issue that could hold back Toro's stock. Bank of America warned that a shortage of parts for gas engines is also an issue for Toro, as it relies on outside suppliers for that part of the manufacturing process. Additionally, the shift toward electric powered lawn equipment and away from gas could threaten Toro's market share. As part of the call, Gilardi cut his price target on Toro to $85 per share from $118. Shares of Toro were down more than 5% to about $94 per share on Wednesday afternoon following the downgrade and are mostly flat for the year. —CNBC's Michael Bloom contributed to this report.

Golfers wear masks as they walk up the fairway at Torrey Pines golf course during the outbreak of the coronavirus disease (COVID-19) in San Diego, California, U.S., May 4, 2020.

Mike Blake | Reuters

For investors looking to make a move in struggling mower stock Toro, it might be smart to give your local golf course a call before committing to a trade.