Why Boyar Thinks it May be Time to Take a Swing with Callaway

In May of this year, Boyar’s Intrinsic Value Research produced a report on Callaway Golf. The report discusses the turnaround effort that is starting to bear fruit at the company. While golf is a sport that is very much out of favor in the U.S. as demonstrated by recent data that indicates nearly 6 million golfers have left the game since 2005 and 2013 saw 143 net golf course closures in the U.S. However we believe Wall Street in valuing Callaway’s shares is being overly pessimistic and is not taking into account how CEO Chip Brewer has streamlined the company’s operations and has put Callaway on a more stable financial footing.

It is also worth noting that in Asia, India, and South America the popularity of golf is growing which should provide additional avenues for revenue growth in the future.
Callaway also owns a minority interest (~15% to ~20%) in TopGolf. TopGolf was started by brothers Steve and Dave Jolliffe in 2000 in Watford, England. The brothers started with the simple idea that going to a driving range could be more fun, and successfully developed and patented technology that embedded a microchip in a tour quality golf ball. By 2007 they had developed 3 locations in England, and 3 more in the United States. There are currently 14 (~11 in the United States with more “coming soon,” and 3 in England) TopGolf facilities where golfers hit golf balls containing microchips toward targets in a driving-range like facility under six different game versions. Players receive instant feedback on their shots, and receive points based on distance and accuracy. The atmosphere is reminiscent of what one might expect to find at a “rock and bowl” night, with loud music, flashing lights, and an active bar scene, all of which contribute to introducing golf to a new generation of potential players.

HBO Real Sports with Bryant Gumbel recently profiled TopGolf in an episode it aired discussing the state of the golf industry and some of the initiatives that are being implemented to help attract more golfers.

For Boyar’s Intrinsic Value Research’s latest report on Callaway please click here.

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