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Fans of Topgolf Callaway brands

You’d think that one of the few pure-play golf stocks could offer that investment with a hole-in-one. But lately, the stock’s performance has resembled a blow to the deep end.

The stock (ticker: MODG ) jumped 13%, to $18.80, on May 10, the day after Topgolf reported first-quarter results, and closed at $17.28 on Friday. Earnings, at 17 cents a share, beat the consensus estimate of 15 cents, the positive news was accompanied by reduced guidance for an operating unit, and Wall Street likes to downplay the path of players in next week’s PGA tournament. Sand traps and water hazards.

However, the bull case remains. Jonathan Boyar, president of Boyar Intrinsic Value Research, said the sale makes Topgolf Callaway more attractive. “It’s just giving investors a great entry point to own a fast-growing business,” he argued.

This business has three parts:

The Topgolf unit operates driving ranges where people can compete against each other or just hang out. These feature the company’s TopTracker ball flight tracking technology, and include hitting areas, bars, dining areas and special event spaces. Staying indoors can play Topgolf’s. World Golf Tour A game played on computers and similar devices.

Driving ranges attract both “on-” and “off-course” golfers (those who don’t want to hit the actual course). Draw in the family. On a recent Sunday morning at Topgolf’s Edison, NJ, location, a bunch of kids were having a blast at a birthday party. A few beaches away, two adults had a good time hitting most of their balls 50 to 100 yards away – not far, but no one seemed to mind. According to the National Golf Foundation, the average age of an off-course-only golfer is 31, compared to 46 for on-course golfers. The off-course population is more skewed toward women and minorities.

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Topgolf’s second business unit, which sells golf equipment clubs and balls, is sold under the brands Callaway, Odyssey, Strata and the newest: Paradigm.

A third segment offers active lifestyle apparel, footwear and golf accessories such as bags, gloves, hats and other items under the Callaway, JackWolfskin and Travismatiw brands.

The quarter’s problem child was the corporate-events business, which accounted for about 20% of Topgolf’s unit revenue. Same-location sales growth is expected in the mid to high single digits this year. Prior guidance was for a high single digit gain.

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That aside, there’s a lot to like about Topgolf Callaway, especially in the long run. In the quarter, the Carlsbad, Calif.-based company’s same-store sales rose 11 percent year-over-year. And the first quarter results were well helped by the new Paradigm brand.

Chief Executive Officer Chip Brewer said on quarterly earnings that analysts warned corporate-event business problems would not change the company’s estimate of $640 million before interest, taxes, depreciation and amortization, or EBITDA, in 2023. “I don’t want to give you the impression that this fell off a cliff,” he said.

Jefferies analyst Randall Koenig, who has a buy rating on the stock, noted that key segments of the business-events segment remain strong, particularly consumer and small business activity.

Formerly called Callaway Golf

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And the company, known for its high-end gear like its signature Big Bertha drivers, launched in 2015. In 2021, he privately acquired Topgolf Entertainment Group in an all-stock deal for about $2.5 billion.

Topgolf now operates about 80 high-tech driving ranges around the country, in major markets such as Los Angeles and Philadelphia, and in smaller ones, including Boise, Idaho. It also has a few regions abroad. The spaces, which have a sports-bar feel, feature couches and high-top tables that fold into individual couches where up to 6 patrons can play together.

Topgolf’s ball tracking technology instantly reports the length, speed, hang time, height and curve of every shot on every golf screen. There’s a full drink list, comfort food like nachos and chicken wings, and TVs with plenty of sports programming.

The acquisition of Topgolf provided much-needed spice to the company’s growth profile. It’s adding about 11 locations each year in the U.S., most recently in Charleston, SC. And he plans to continue that pace until he reaches 250.

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“You have a very strong golf equipment business that generates good cash flow, but at the same time the growth engine will be Topgolf for the next decade,” said Joe Altobello of Raymond James. Although it recently lowered it to $30 from $35, it maintained its outperform rating. That’s based on a combined multiple of 12.5 times estimated Ebitda—16 times for the fast-growing Topgolf business and 10 times for the long-standing Callaway operations.

Topgolf’s division EBITDA reached $235 million last year, or 42 percent of the company’s total. The company said it expects to achieve about half of this year’s EBITDA figure. Beer said Baron “Topgolf will be the majority of our EBITDA and revenue in the near term,” he said after the earnings call.

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In the year Golf, which struggled from 2000-10, ended its longest slide in 2015, as measured by rounds played. And it got a big boost in 2020 and 2021, during the worst of the pandemic, because it’s played outdoors and players can easily maintain social distances. Although rounds played in the U.S. were flat in the first quarter, they were still well above 2019’s pre-pandemic levels, according to the National Golf Foundation, which did not disclose specific totals.

CEO Beer estimates that the addition of 11 TopGolf locations each year will add three to four million new off-course golfers.

Overall, once out of its current vault, Topgolf’s stock should rest right on the green.

Write Lawrence C. Strauss at



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