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Aug 2, 2021
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Earnings for Callaway are expected on 8/5. I've put every free dollar into 35C for 8/20.
Callaway is no longer just a golf company. They've expanded into multiple verticals:
Why did I buy? Because golf is on a rebound. Last quarter, the golf equipment business and apparel alone pulled in an EPS of 0.62; this was during peak COVID. Equipment sales are up:
The surge in equipment sales that began last May is showing no signs of letting up. Through June, YTD combined golf club and ball wholesale dollar sales are up 77% over last year and 35% over 2019.
This quarter, I expect the sales in the golf and apparel segments will be robust, along with additional revenue from TopGolf.
TopGolf is a gamified driving range mixed with a restaurant. They print money. It's like $100 to rent a bay and the whole time you can order food and drinks. Imagine if you had to pay to rent a table at a restaurant. Others have done DD showing how packed they always are. People even beg on Twitter to have TopGolf come to their city. I personally love TopGolf.
They're opening new venues at a breakneck pace. TopGolf just opened a new venue in NYC this weekend. This year, they plan to open 8 new venues for a total of 69 while last year they had 61:
Globally, we have 66 company-owned venues in operation. For the full year, we are on track to open at least three more venues, for a total of at least eight venues this year. We also remain confident in our pipeline for future venues.
TopGolf originally was supposed to IPO on their own, valued at 4B, until the pandemic hit. TopGolf instead chose to sell the business to Callaway at a 2.5B valuation. Currently, Callaway in total is valued at ~5.9B. In a post-pandemic world, new golfers from the lockdown, new golfers from TopGolf, and a booming sportswear business (which Nike proved is strong), I don't see how this valuation makes sense. Additionally, TopTracer being sold to driving ranges across the world:
We successfully installed 1,533 bays in Q1, a new record despite the COVID challenges globally. We now have just over 10,000 bays globally, which is significantly more than our largest competitor. Demand remains strong for the product, and we are finding strong synergies between the Callaway sales team and the Toptracer team. We remain on track for 8,000 bays this year.
It seems every business segment will either meet or exceed expectations. Yet for some reason, analysts are stuck in the past- their thesis is that "young people don't like golf." What? My friends that don't play golf are always down to hit TopGolf, crush a few brews, and hang out. It's for hardcore/casual golfers alike.
This quarter, TopGolf will be fully included in earnings. The average EPS estimate for this quarter is 0.01 which I think completely ignores these facts. I also expect that the COVID shock from last year will have fully recovered. So now, Callaway has a bigger market from all the COVID golfers to sell golf shit, a sportswear business, and a money machine ala TopGolf. Callaway has been diversifying into a behemoth.