Analyst upgrades:

• Keefe Bruyette upgraded KeyCorp (NYSE: KEY) to Outperform from Market Perform due to valuation and the company's capital position. The firm has an $8 target price on the stock.
• BofA/Merrill upgraded its view of the semiconductor sector and upgraded Intel (NASDAQ: INTC) and Marvell Technology (NASDAQ: MRVL) to Buy from Neutral, LSI Corp. (NYSE: LSI) to Buy from Underperform, and Maxim (NASDAQ: MXIM) and National Semiconductor (NYSE: NSM) to Neutral from Underperform. The firm now sees 2010 revenue growth of 21% vs. its prior estimate of 14% due to improving electric demand and lean inventories.
• Thomas Weisel upgraded Vital Images (NASDAQ: VTAL) to Overweight from Market Weight based on compelling valuation and potential upside from its new ViTAL Enterprise product offering.
• Jones Apparel (NYSE: JNY) was upgraded to Buy from Neutral at Goldman.
• Hess Corp. (NYSE: HES) was upgraded to Overweight from Equal Weight at Barclays.
• Nationwide Health (NYSE: NHP) was upgraded to Outperform from Market Perform at Morgan Keegan.

Callaway Golf (NYSE: ELY - option chain) stock is falling today after the company said it will reduce its quarterly dividend to 1 cent per share. The dividend had been at 7 cents per share. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ELY.

This morning, ELY opened at $6.24. So far today the stock has hit a low of $6.10 and a high of $6.47. As of 12:25, ELY is trading at $6.26, down $1.02 (-14.1%). The chart for ELY looks bearish and S&P gives ELY a negative 2 STARS (out of 5) sell ranking.

In a press release, Callaway Golf (NYSE: ELY) announced that it has signed former NSYNC'er and current pop prince Justin Timberlake to an endorsement deal.

Timberlake, who currently hosts the PGA Tour's Justin Timberlake Shriners Hospitals for Children Open, will "play a full complement of Callaway Golf clubs, golf balls and will carry a bag branded with the Company's logo."

Financial terms of the deal were not disclosed, but here's my question: Would you -- would anyone? -- buy Callaway golf clubs because Justin Timberlake plays them? He may be one of the better celebrity hackers, but he's no Tiger Woods.

The endorsement deal will probably get Callaway's logo to show up in places you don't normally see it: US Weekly, People and PerezHilton. But are those really places Callaway will benefit from exposure?

After a U.S. Open victory that was perhaps the most thrilling of his entire career, Tiger Woods will miss the rest of the season to undergo surgery to repair a torn ligament in his left knee.

Obviously this is bad news for his main sponsor, Nike (NYSE: NKE). They pay him handsomely to hit their clubs and wear their hat (although his bag bears the logo for Buick), and watching a close-up of his 18th hole birdie was priceless marketing: as the ball rolled, the Nike swoosh was in plain view.

And in a larger sense, this is bad news for anyone who's marketing on the PGA Tour. It's a well-known fact that golf's ratings plummet for any event Tiger isn't playing in. I mean, who really cares about Justin Leonard and Geoff Ogilvy? There's Tiger and then there's everyone else. Wake me when it's over -- maybe I'll go watch some arena football.

ThinkPanmure intiated coverage of Intel (NASDAQ:INTC) with a "buy", according to the the AP.

Wachovia downgraded Lehman (NYSE:LEH) to "market perform" from "outperform" according to Briefing.com. The newservice also reports that Caris initiated Colgate-Palmolive (NYSE:CL) as "above average."

According to 24/7 Wall St. Callaway Golf (NYSE:ELY) was started as Outperform at Raymond James. The financial website also writes that Coca-Cola Company (NYSE: KO) was raised to Buy from Hold at Deutsche Bank.

Douglas A. McIntyre

Last month I wrote about the resilience of golf in the face of a struggling market for many other consumer product companies. But when struggling golf shaft maker Aldila (NASDAQ: ALDA) announced an 18% decline in first quarter sales of its shafts, the company was quick to blame the economy.

"A weakening economy and decreased industry retail sales compared to last year impacted our sales," said Mr. Peter R. Mathewson, Chairman of the Board and CEO. "Market participants appear to be taking a cautious approach to 2008. While we are disappointed with our sales we did remain profitable and we believe we are well positioned for the back half of the year. Production for new programs in which we will participate should begin during the late third quarter and should be in full swing during the fourth quarter," Mr. Mathewson said.

With the generally gloomy outlook for the economy and consumer spending, many investors are looking for "recession-proof" industries and companies: tobacco, gambling, alcohol, and pornography (you have to find something to do if you lose your job!).

But how about golf? The latest issue of GolfWeek asks the question, Is golf recession-proof?

Gordon Dalgleish, president of Perry Golf, told GolfWeek that "We can think of no other consumer-oriented business that is as insulated from the effects of general economic conditions other than beer, cigarettes, and perhaps video games."

Gilford Securities analyst Casey Alexander added that golf is "more recession resistant than other consumer-oriented activities ... A weak economy rarely has much negative impact on overall golf spending, just as a strong economy rarely has a positive effect on overall golf spending."

MOST NOTEWORTHY: Mortgage Insurers, Thoratec Laboratories and Callaway Golf were today's noteworthy initiations:

• Keefe Bruyette resumed coverage of Old Republic (NYSE:ORI), MGIC Investment (NYSE:MTG), PMI Group (NYSE:PMI) and Radian (NYSE:RDN) with Market Perform ratings and a $16 target, $13 target, $7 target and $6.50 target, respectively, as they expect increased capital needs to generate operational headwinds in the near-term.
  
• JMP Securities expects FDA approval of Thoratec's (NASDAQ:THOR) next generation HeartMate II VAD any day now and for the company to meet/beat 2008 sales guidance. Shares were started with an Outperform rating and $20 target.
  
• Callaway Golf (NYSE:ELY) was assumed at Stephens with an Overweight rating and $19 target. The firm is positive on Callaway's leadership position, strong balance sheet, new products and international opportunity.

OTHER INITIATIONS:

• Kaufman Bros. initiated Bancscares of Florida (NASDAQ:BOFL) with a Buy rating and $15.50 target.
  
• Raymond James started Dialysis Corp of America (NASDAQ:DCAI) with a Strong Buy rating and $9 target.
  
• Intuitive Surgical (NASDAQ:ISRG) was initiated at Lazard with a Buy rating and $420 target.

MOST NOTEWORTHY: Amazon.com, Altria Group and Skilled Healthcare were today's noteworthy initiations:

• Canaccord Adams expects Amazon.com (NASDAQ: AMZN) growth to be driven by its expanding international reach, mix shift to third-party revenue, product innovation, and category expansion. The firm initiated shares with a Buy rating and $78 target.
  
• UBS is positive on Altria's (NYSE: MO) growth, low likelihood of downward EPS revisions, and best-in-class cash flow distribution; shares were started with a Buy rating.
  
• Skilled Healthcare (NYSE: SKH) was initiated with an Outperform rating at Morgan Keegan, as they believe nursing home reimbursement risk is already reflected in its valuation.

OTHER INITIATIONS:

• KeyBank assumed Callaway Golf (NYSE: ELY) with a Buy rating and $19 target.
  
• Credit Suisse initiated Intuit (NASDAQ: INTU) with an Outperform rating and $35 target.
  
• Broadpoint initiated Novell (NASDAQ: NOVL) with a Buy rating.

Callaway Golf (NYSE: ELY) is scheduled to release Q4 EPS this afternoon.

ELY will hold an analyst meeting on February 7.

ELY overall option implied volatility of 50 is above its 26-week average of 41 according to Track Data, suggesting larger risk.

CA, Inc. (NYSE: CA), an information technology management software company, closed at $22.30 Wednesday.

Stanford Group initiated CA with a Hold rating. Stanford says: "In our opinion CA has suffered from three main problems in recent years; growth, restructuring-related disruptions, and a complex financial model that hindered visibility of its financial performance."

CA is expected to report Q3 EPS after the market close tonight. CA February option implied volatility of 43 is above its 26-week average of 28 according to Track Data, suggesting larger price risks.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Callaway Golf Company (ELY) is engaged in the design, manufacture, and sale of golf equipment. Products include drivers, fairway woods, hybrids, irons, wedges, putters and balls. The company also sells such accessories as golf bags, golf gloves, golf headwear, golf footwear, golf towels, and golf umbrellas. In addition, Callaway licenses its trademarks to third parties for use on apparel, watches, travel gear and eyewear. The firm sells its products to pro shops, sporting goods retailers and mass merchants.

Callaway had good news for investors last week, when it said it expected FY07 EPS of 87-89 cents and revenues of $1.125 billion. Analysts had been looking for 87 cents and $1.11 billion. The CEO cited an improved product development process, improved inventory management and the successful re-launch of the Top-Flite brand for the favorable view. Wachovia subsequently upgraded the shares from "market perform" to "outperform." The stock popped into bullish "flag" consolidation pattern on the announcement. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

MOST NOTEWORTHY: Websense (WBSN), OSI Pharma (OSIP), Gap (GPS), Tiffany & Co (TIF) and Callaway Golf (ELY) were today's more noteworthy upgrades:

• Jefferies upgraded Websense (NASDAQ: WBSN) to Hold from Underperform to reflect the strong recent results from SurfControl as well as the possibility for 2H software seasonality.

• Lehman upgraded shares of OSI Pharma (NASDAQ: OSIP) to Overweight from Underweight on valuation as well as expectations for price increases and growth in Europe.

• Susquehanna upgraded shares of Gap (NYSE: GPS) to Positive from Neutral citing management's ability to control costs & manage inventories, share buybacks, and streamlining of organizational structure.
  

• Tiffany & Co (NYSE: TIF) was upgrade to Accumulate from Neutral at Buckingham based on valuation and strong worldwide luxury trends outside of Japan.

• Matrix upgraded shares of Callaway Golf (NYSE: ELY) to Strong Buy from Hold to reflect positive fundamentals and the recent share weakness...

OTHER UPGRADES:

• Valueclick (NASDAQ: VCLK) was upgraded to Buy from Hold at Needham.

• WestLB raised Swisscom (NYSE: SCM) to Add from Hold and Ericsson (NASDAQ: ERIC) to Buy from Hold.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Although Callaway Golf (NYSE: ELY) reported solid earnings and upped guidance after the bell, the stock has moved down in after hours trading. The reason for this sell-off, according to press reports, is the fact that the company's new guidance is still below the analysts' consensus for yearly EPS and revenues.

On the quarter, Callaway was roughly in-line with estimates -- they missed EPS estimates by a penny but matched revenue expectations. For the year, Callaway expects to earn 78-84 cents per share, an increase from previous guidance, but still below the consensus estimate of 89 cents per share. The fact that the company didn't up guidance all the way to analyst expectations is nothing surprising in my experience, very few companies actually match expectations in guidance.

As I mentioned in an earlier post, I think the play in golf stocks is Adams Golf (OTC: ADGO). The stock is trading for roughly half Callaway on almost every metric and I'm very bullish on the future of the company's hybrid irons.

Disclosure: Kevin Kelly is long Adams Golf.