Boyar Research's Jonathan Boyar on how $MODG is growing an entire industry
Oct 17, 2023
auto_awesome
Jonathan Boyar, President of Boyar Research, discusses the growth potential and concerns surrounding Topgolf Callaway Brands. Topics include the land grab for new stores, financing, advertising revenue, KPIs, valuation, and the impact of Toptracer. The speakers also touch on stock pressure, potential upside scenarios, and the benefits of the Modern Golf business model.
Topgolf is a unique concept with a strong first mover advantage and has been a huge pandemic beneficiary.
MODG presents a compelling investment opportunity with potential growth in Topgolf and stable returns from the golf equipment business.
An activist playbook for MODG could involve selling the apparel business, maximizing returns in the golf equipment segment, and potentially breaking apart the different parts of the company to unlock value.
Deep dives
MODG: An Interesting and Compelling Story
MODG, formerly known as Callaway, is an intriguing company with a compelling story. The CEO, Chip Brewer, has done a fantastic job since taking over in 2012 or 2013. One of their major assets is Topgolf, which has proven to be a huge pandemic beneficiary. Despite recent concerns about declining demand for the events business, Topgolf remains a unique concept with a strong first mover advantage. The company's focus on growing the game of golf and the potential synergies between Topgolf and the golf equipment business make it an attractive investment. With the stock currently at a low point, it presents an opportunity for patient investors.
The Potential for Synergies and Growth
MODG has multiple segments, including the apparel business and the golf equipment business, which includes clubs and balls. While the apparel business could potentially be sold, the golf equipment business, including the Callaway brand, offers stable returns and strong brand recognition. The real excitement lies in the potential growth of Topgolf. With its unique entertainment concept and a strategy to expand internationally, Topgolf has a significant growth runway. The company's introduction of the top tracer technology at driving ranges and country clubs adds another high-margin revenue stream. Overall, MODG presents a compelling investment opportunity with a long-term growth potential.
Potential Activist Playbook and Valuation
An activist playbook for MODG could involve selling the apparel business, maximizing returns in the golf equipment segment, and potentially breaking apart the different parts of the company to unlock value. Valuations could be based on comparable multiples in the industry. For example, the golf equipment business could be valued at 12 times EBITDA, while the apparel business could be valued at 10 times EBITDA. The fast-growing entertainment concept of Topgolf could command a premium multiple, such as 15 times EBITDA. Regardless of the specific valuations, the potential for significant returns and growth make MODG an attractive investment opportunity.
Overcoming Concerns and Looking Ahead
There have been concerns raised about the demand for the events business and the sustainability of Topgolf. However, these perceived challenges are short-term in nature and do not overshadow the potential of the company. MODG has a strong management team that is highly motivated to make it succeed. With a long runway for growth, significant insider buying, and innovations like top tracer technology, MODG has the potential to thrive. While there are always risks with any investment, being patient and taking advantage of the current low stock price could lead to significant returns.
Summary Conclusion
MODG, formerly Callaway, presents an intriguing investment opportunity. With Topgolf as a major asset and the potential for synergies with the golf equipment business, the company has a strong growth potential. There are short-term concerns around the events business, but the long-term prospects remain compelling. The potential for an activist playbook, including selling the apparel business and focusing on core growth areas, could unlock value. Valuations based on comparable industry multiples add to the investment case. Overall, MODG offers an attractive investment opportunity with significant upside potential.
Jonathan Boyar, President of Boyar Research, returns to the podcast for the fourth(!!) time to discuss his thesis on Topgolf Callaway Brands (NASDAQ: MODG) and how it is growing an entire industry.
[1:42] Topgolf Callaway Brands $MODG and why its interesting
[3:57] Why $MODG is clearly a "Topgolf" story? And, what is Topgolf
[12:05] Land grab for opening new "Topgolf" or competitive stores
[15:00] What Jon thinks people are so worried about Topgolf
[18:06] Topgolf pushback: financing new stores
[22:17] Would it be better to separate Topgolf and Callaway?
[24:42] Topgolf advertising revenue stream and what is the company referring to when they say they are "maximizing economics" of the business (PEI system)
[29:30] KPIs the company tracks
[33:50] $MODG valuation
[39:04] "Toptracer" part of the business
[41:22] Pressure on $MODG stock; what keeps Jon up at night about the idea and various upside scenarios
[46:36] Final thoughts
Today's episode is sponsored by: Alphasense
This episode is brought to you by AlphaSense, the AI platform behind the world's biggest investment decisions. The right financial intelligence platform can make or break your quarter. AlphaSense is the #1 rated financial research solution by G2. With AI search technology and a library of premium content, you can stay ahead of key macroeconomic trends and accelerate your investment research efforts. AI capabilities, like Smart Synonyms and Sentiment Analysis, provide even deeper industry and company analysis. AlphaSense gives you the tools you need to provide better analysis for you and your clients. As a Yet Another Value Podcast listener, visit alpha-sense.com/fs today to beat FOMO and move faster than the market.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
