TopGolf Callaway - Good Co/Bad Co
Club Business Undervalued
Summary
TopGolf Callaway is spinning off or selling its TopGolf Entertainment business from its legacy Golf and Apparel business, expected to occur in 2026 (though it has experienced several delays). Callaway’s remain‑co—comprising premium golf clubs, active‑lifestyle apparel, and the TopTracer platform—trades at approximately 5× our 2027 estimated EPS of $1.57 and at a 1.2x EV/Sales multiple. We see ~50% near-term upside stemming from several catalysts: Impending COVID‑era golf club replacement cycle, increasing golf participation and rounds played, accretive Jack Wolfskin proceeds that help de‑leverage the balance sheet, and underappreciated subscription‑style TopTracer revenue. Standalone Callaway trades at 1.2x 2027e Sales (6x EPS), compared to GOLF at 2.3x, and TaylorMade’s rumored sale price of ~2.4x EV/Sales. While Callaway’s brand perception is 3rd to these, and should trade at a discount, the discount is far too wide. At 12x $1.57 2027e EPS, represents a ~$19 stock price, or 125% upside.
How to Play It (Long Only) – Long MODG
How to Play It (L/S) – Long MODG / Short LUCK (Would ratio it – Long 1 share of MODG, Short 0.3 Shares of LUCK). Isolates the Golf business as the TopGolf & Bowling businesses should be highly correlated (both entertainment, sport-related, higher cost options).
NOTE – This write-up and analysis assume no equity value for the TopGolf business. Net debt is assumed to be $1.175B at spin-off. The remaining $363.2m of non-lease debt is assumed to be offset by cash retained and generated between now and the spin-off date. Based on the pro-forma balance sheet post Jack Wolfskin sale, MODG had $612m of cash.
Background
On October 27, 2020, Callaway and Topgolf entered into an all‑stock merger agreement. Under the terms, Callaway—already a 14 % stakeholder in Topgolf—issued approximately 90m shares of its common stock to Topgolf’s remaining shareholders, based on a fixed Callaway share price of $19.40. This implied an equity value for Topgolf of about $2.0B (inclusive of Callaway’s existing stake). Callaway also assumed Topgolf’s net debt of roughly $555m, yielding an enterprise value near $2.5B (~ 9× Topgolf’s 2019 adjusted EBITDA of $270m). Both boards unanimously approved the deal, received customary regulatory and shareholder clearances, and closed on March 8, 2021. Between announcement and closing, Callaway’s share price rose from $15 to $30, reflecting a $3.1B implied purchase price. Strategically, the merger aimed to showcase Callaway clubs to Topgolf’s audience, broadening the brand’s reach among new golfers.
Since closing, Topgolf venues have underperformed. Same‑venue sales declined 12% in Q1 2025, and management guides to a 7%–12% decline for full‑year 2025, driven by increased competition, high visit costs, and reduced corporate spending. As a result, the expected synergies have not materialized, and the combined entity’s valuation now falls below management’s standalone estimates for each business. This analysis focuses exclusively on the remain‑co operations: golf clubs, active lifestyle apparel, and TopTracer.
Thesis
Good-Co / Bad-Co – Good-co masked by Poor TopGolf Results
TopGolf’s underperformance masks the solid fundamentals underpinning Callaway’s core golf club and apparel businesses. The recently announced sale of Jack Wolfskin to ANTA Sports for $290m —Jack Wolfskin being a breakeven business—is immediately accretive and materially reduces the remain‑co’s leverage. Callaway’s TravisMathew brand commands premium positioning in the U.S., on par with Peter Millar and ahead of Nike, Adidas, and Under Armour. Although Callaway does not report brand‑level revenues, TravisMathew’s market reputation and management commentary suggest its value exceeds that of Jack Wolfskin. In addition, the remain‑co retains other substantial assets, including Ogio, Callaway apparel and footwear, and TopTracer Technology.
Excluding Jack Wolfskin, I project a 2.5% year‑over‑year revenue decline in 2025, before returning to low‑single‑digit growth in 2026 and 2027. Notably, all four major club manufacturers are launching new iron sets in 2025—a rare alignment given their typically staggered release schedules. Increased competition will likely drive promotional activity and dilute demand for any single brand. Consumers are largely agnostic among these four manufacturers; Ping and Callaway occupy a secondary tier below Titleist and TaylorMade. An additional tailwind stems from the increasing adoption of zero‑torque putter designs—pioneered by L.A.B. Golf and now adopted by pros such as J.J. Spaun, Rickie Fowler, Justin Rose, and Adam Scott—which should drive incremental putter volumes. Odyssey’s recent introduction of the Ai‑ONE Square to Square Jailbird and Cruiser models is well‑positioned to capitalize on this emerging trend.
Golf Macro Tailwinds
Although TopGolf’s strength in 2022–2023 may prove transient, the cohort of golfers who took up the game during—and immediately after—the COVID‑19 surge is here to stay. Annual rounds played have remained robust, rising from 502m in 2020 to 545m in 2024. Club‑replacement cycles vary by skill level and club type: on average, drivers are replaced every four years, irons every five years, wedges every three to four years, and putters approximately every eight years (though avid players know putter turnover can be even more frequent). Consequently, the influx of players in 2020–2021 is now approaching its natural point of club replacement—particularly for drivers, irons, and wedges.
Moreover, many new golfers initially purchase used or entry‑level sets to “test the water” before committing significant capital to high‑end equipment. While Callaway’s revenue experienced a step‑function jump from Q3 2020 through Q2 2021, I believe the company has yet to realize the full benefit of the 13.8 % year‑over‑year increase in rounds played in 2020 and the 5.4 % increase in 2021. Instead, Callaway is poised to capitalize on the impending replacement cycle between 2025 and 2027.
As these golfers’ skills improve, demand for custom‑fit clubs—which command premium price points—should rise. Given the substantial cost of a full set, consumers typically stagger their purchases (for example, replacing a driver one year and irons the next), spreading incremental revenue over multiple seasons. Importantly, this replacement cycle represents additional upside beyond the spending of pre‑COVID golfers already in their replacement cycle.
GolfNow had its busiest Independence Day weekend on record in 2025, hitting multiple all‑time highs in rounds booked. On Friday, July 4, the platform facilitated over 152,000 rounds—a single‑day company record and a 13% increase versus last year’s holiday. Across the four‑day weekend (Thursday through Sunday), GolfNow booked 630,000 rounds, up 4% from the prior year’s mark. Notably, Thursday, Saturday, and Sunday each set new daily records, underscoring sustained demand beyond the holiday itself.
These milestones cap a strong year for GolfNow, which already posted monthly booking records in March, May, and June—and previously set holiday highs on Easter, Memorial Day, and Father’s Day.
Yearly Golf Rounds
Juniors + Woman/Girls = Incremental TAILwind
In 2024, 3.7m juniors played on‑course golf—the highest total since 2006—and over one‑third (35%) of those juniors were girls, up from 15% in 2000. Nearly 8m females (age 6+) played on course in 2024, and total female participation (adult and junior) has exceeded 6m annually for the past five years—the first time since before the 2007 financial crisis. Since 2019, female golfer numbers have grown by 2.3m, a 41% increase. Women now comprise 28% of on‑course golfers—the highest share on record—and are overrepresented among beginners (39%), juniors (35%), and off‑course‑only participants (43%) relative to their presence in the overall golf population.
More than 24m Americans did not play on course in 2024 but report being “very interested” in doing so—a measure the National Golf Foundation (NGF) calls “latent demand.” This pool of potential golfers has expanded by 55% since 2019, driven in part by the rise of off‑course golf. Nearly half of this latent segment are “lapsed golfers” who haven’t played on course within the past year; the remainder have never played on a course before.
Anecdotal evidence suggests increasing engagement among women, many of whom are either taking up the sport, expressing interest, or accompanying partners on the course. Males have historically dominated golf. Thus, the entrance of women into the sport is a relatively new material business model.
TopTracer – Underappreciated and Undermonetized Today – Steady State High Margin Recurring Revenue Stream
TopTracer technology is a combined launch monitor and software platform that delivers real‑time ball‑flight data—distance, spin, launch angle, and more—enabling golfers to analyze and improve their swings. It also lets players “play” courses from around the world without leaving their driving‑range bay or indoor facility. This capability is fundamentally reshaping the driving‑range business: instead of buying a $7–$15 bucket of balls for an hour’s practice, golfers now pay $50+ for an oversized bucket with interactive games and virtual rounds. Over 24,000 bays worldwide are now equipped with TopTracer.
On the 9/4/24 separation call, management stated TopTracer generated $46m in revenue and $1m in EBITDA from Q3 2023-Q2 2024. Upfront costs to range owners consist of electrical contractors for the power/data infrastructure and cosmetic updates in anticipation of the tech, including mats, lights, etc. Customers (driving ranges) sign non‑cancelable 3–5‑year license agreements. No upfront payment is made to Callaway for the hardware, a razor/blade model. While EBITDA margins are 2% today, as the installed base matures, and COGS + D&A decline, margins should significantly increase. From 2021 to today, bays with TopTracers installed increased from 10,000 to 24,000+, thus COGS & D&A associated with these installs are still flowing through the I/S. There is roughly a 0% chance 2% margins are the normalized margins.
Domestic Topgolf venues, which likely yield minimal revenue currently (internationally licensed sites pay royalties instead), present a source of incremental revenue. Assuming 101 company‑owned TopGolf locations (excluding eight international licenses) with 70 bays each, represents an incremental ~7,000 TopTracer subscriptions to be signed post-separation. At $200/month, that equates to $17m of high‑margin revenue and, at 65% EBIT, $11m of net income—about a 4% uplift to 2024e results ex‑Jack Wolfskin. Because the hardware is already installed, this revenue is nearly all incremental. It would not surprise me if TopGolf and Callaway entered into a 3-year transition agreement where TopGolf pays a discounted rate.
THE KICKER - Since 2016, TopTracer contracts have been priced at $200 per month. Given the remarkable success many ranges are experiencing, pricing is a strategic lever I anticipate Callaway will use as contracts come up for renewal. The case studies below—as well as feedback gathered through industry conversations—highlight how significantly underpriced this technology currently is. Even if Callaway were to double the monthly rate, range operators are unlikely to flinch due to the high ROI and low/no upfront cost. I anticipate them starting to incorporate yearly price escalations. Since 2015, I estimate the national average for a large bucket of balls (80-100 balls) has increased from $9 to $15. It is therefore logical to expect TopTracer to pursue pricing increases. Assuming prices rise at the same percentage as balls did, monthly subscriptions increase from $200 to ~$330. At a local driving range, TopTracer bay rentals have increased from $35/hour to $50/hour from 2019 to today. Another increase from $30 to $35 on weekdays, $35 to $40 on weekends from 2020 to today.
Revenue from 24,000 mats increases from $57.6m to $95m, with all incremental $38m of incremental revenue dropping to the bottom line – a ~11% uplift to 2024e EBIT. Taking both the incremental TopGolf signings and pricing opportunity at traditional ranges represents a potential 15% uplift to EBIT. This aspect of the story remains largely overlooked by both the Street and broader market participants.
Feedback from range operators suggests that facilities without launch monitors or simulators will struggle to compete. While casual golfers appreciate the gamified experience, serious players require premium practice balls—such as Pro V1—to ensure data accuracy, which raises operating costs. Efficient range operators can calibrate the technology to produce more “realistic” numbers – Ie, older range balls may spin more, lowering distance. You can program the system to adjust the distance upwards to offset the higher spin. Nonetheless, TopTracer significantly boosts engagement and enjoyment, as one Reddit user noted: “Once you try it, there’s no going back to a plain bucket of balls.”
From one range operator, when asked about the transition from a standard range to a TopTracer range, “No brainer territory with a number of sites reporting double and even threefold growth on revenues. My local 34 bay range was a £250k business and now generates £1.25m in balls and basic F&B. The tech comfortably at home in fun city centre ranges and private clubs.” This has been the overarching response when asking about the revenue improvements. TopTracer/Callaway thus should have pricing power given the success, which would all be incremental profit.
Cluster of Insider Buys
Between 5/14/25 and 6/10/25, four insiders bought a total of ~900k shares, with Ogunlesi Adebayo being the most aggressive, purchasing over 800k shares worth over $5m (though in relation to his $2.5B net worth, is really meaningless). Chip Brewer, who already owns ~2m shares, purchased 20k shares. Purchases were made at prices ranging from $6.43-$7.70. Although the stock has appreciated since then, the last insider purchase prior to these transactions occurred on December 12, 2023.
Commentary & Findings From the Road
Over a few-day span, we traveled to many Dick’s Sporting Goods, Golf Galaxy, Local Pro Shops, and Going Going Gone’s to chat with reps about product sales. I was keen on learning if certain brands were pushed, inventory levels, the general sentiment of this year's lineup of clubs, and product location.
Persistent Common Themes
Callaway leads the floor plan. First clubs/balls you see in many stores; Elyte Drivers and Woods consistently front and center.
Heavy inventory everywhere. Drivers, fairways, balls, shoes—almost all brands fully stocked. Ping had the “lightest” selection and inventory on hand.
Aggressive promo/discount environment. BOGO/2‑for deals on balls (Chrome Tour, Diablo, SuperSoft), $100–$300 cuts on prior‑gen woods/irons, trade‑in bonuses (50% at GG). Titleist largely avoids discounting, per staff.
Ball sales stratification. Value/rec player: SuperSoft & Diablo moving well; Costco 24-pack at $28 – recent golf trip – several mid handicap players played Kirkland’s. The price point is too good with adequate performance (long-term risk).
“X” balls: TaylorMade & Chrome Tour X appear to be better sellers than standard models.
Gimmick/colored graphics mostly sit, except for holiday spikes (Mother’s/Father’s Day).
Wedges skew Titleist. SM10s are prominent; previous gen SM9 on sale. “Almost no Callaway wedges,” repeated.
Notable/Interesting Observations
Corrosion call‑out: Adjustable‑loft drivers (mixed metals + moisture) reportedly corrode across brands.
Off-the-shelf Titleist drivers had shafts with/ custom options —differentiated fit message.
Protective sleeves on Titleist balls (shrinkage/theft prevention).
The staff member was surprised to see Tommy Armour come back for this season. These are the lowest quality clubs and don’t sell fast, but the margin justifies the inventory drag.
Ping rep recommending Callaway driver—brand‑agnostic or sign of Ping driver positioning? Also said Qi35 isn’t played by many Taylormade sponsors on Tour (perception hit).
Callaway Trade‑in promo signage “expired” but maybe extended—messy execution.
Callaway/Good Good glove & ball collabs exist, but “not popular.” Titleist gloves are the most visible; G/Fore enters at $25; TravisMathew gloves at $39, none sold. News to me that TravisMathew is in the glove space. I’ve never seen anyone wear one.
Brand Snapshots
Callaway: Dominant in placement; broad promo mix (balls & clubs); Elyte fully stocked; wedges underrepresented. Balls (Chrome Tour) are gaining traction thanks to a firmer feel; lower-tier balls (SuperSoft/Diablo) are selling strongly.
Titleist: Strong wedge wall; Pro V1x and drivers sell; minimal discounting; custom shafts highlighted.
TaylorMade: Qi35/Qi10 well stocked; significant trade-ins; “X” balls move; clothing/shoes presence mixed (shoes good, apparel weak).
Ping: G440 present but lighter inventory; perceived heavier drivers; rep bias both for Ping forgiveness and against TM Qi.
DSG Brands (Maxfli/Tommy Armour/Walter Hagen): Strong apparel presence (Walter Hagen), high-margin clubs (Tommy Armour), and even PGA Tour wins touted for Maxfli. The amount of Walter Hagen's inventory was stunning. If it weren’t for this brand, Going Going Gone shelves would be half empty. This product does not sell well, but it must have high margins to justify the inventory drag. Walter Hagen is a value purchase for casual players.
Others (Bridgestone/Srixon/Cleveland): Bridgestone running $5-off promos; generally lumped into the “rest” tier after TM & Titleist per staff comments.
Implications / Watch Items
Sell-through risk: “Lots of inventory + promos” suggests slowing demand post‑COVID boom; retailers pushing deals to move aging stock. Excess inventory from 2024 + full launch slate in 2025 may pressure 2H margins.
Firmness/feel upgrades (Chrome Tour) can reaccelerate sales.
Holiday-themed golf balls generate limited incremental revenue and primarily appeal to casual or infrequent players.
Wedge category opportunity for Callaway: Consistently under-represented on shelves.
Valuation
Assuming zero equity value for TopGolf and net debt of $1.175B, remain‑co’s market cap is $1.54B ($8.40/share on 184m shares outstanding) and enterprise value of $2.71B. Before accounting for any cash generation through 2027—which is conservatively punitive given expected free‑cash‑flow, debt paydown, interest savings, and EPS accretion—I project the Golf Clubs + Apparel + TopTracer segments will deliver 2027 EPS of $1.57. At $8.40/share, that implies a ~5.3× P/E multiple.
By comparison, TaylorMade’s 2020 sales were $943m before its 2021 sale to Centroid Investment Partners at $1.6–$1.7B (1.75× sales, debt‑free). Today, Titleist (Acushnet) trades at 21.9× TTM EPS or 2.3× EV/Sales. Given Callaway’s scale and growth profile, a 1.5x EV/Sales multiple on 2027e sales of $2.242B implies a $3.8B EV or $2.63B equity value compared to $1.54B post‑spin market cap, representing 70%+ upside over the next 2½ years.
Recent rumors suggest a potential TaylorMade sale at $3.5B. In 2023, TaylorMade generated revenue of $1.44B, assuming it grew 3% to $1.48B in 2024, equates to a 2.4x TTM EV/Sales multiple. Applying this multiple to Callaway’s 2024 revenue ex‑Jack Wolfskin ($2.14B) yields a $5.1B EV, or ~$4B equity—160% upside relative to the $1.54B post‑spin market cap.
Lab Golf Recent Sale - After JJ Spaun’s victory, demand for LAB putters exploded. The company sold about 130,000 units last year, and is on pace to roughly triple that in 2025. The putters are far from cheap. They start at $399 on L.A.B.’s website, and modifications can send the price over $1,000. If we assume 390,000 units at $450 each (need to factor in retail markup), that’s $175m of revenue. Reports stated the valuation of LAB was over $200m, call it $210m to make it easy, or 1.2x sales. Assuming the same multiple for Callaway (very punitive given Callaway has a much better brand, and more diverse revenue base) equates to an EV of $2.56B or equity value of $1.39B, 10% below today’s market cap. This assumes LAB does indeed triple sales as the report suggested. All in, it sets a floor multiple for the business.
In every scenario, Callaway’s core remain‑co appears attractively valued. If excess free cash flow is deployed to repay debt, both earnings power and equity value should rise further. This analysis excludes any residual equity value in TopGolf and pre‑spin cash flows. Additional upside optionality comes from a potential TopGolf sale to strategic or financial buyers such as PIF, Lucky Strike Entertainment, or private‑equity firms.
*2024 does not include any interest expense. 2025-2027 is assumed to be $87m/yr.
Management Comp & Poor Acquisition History
Focusing exclusively on the standalone golf business, management’s incentive structure ties compensation to sales performance and Adjusted EBITDA. In 2024, most targets were missed, so only one executive earned incentive pay—an encouraging indicator that goals are challenging rather than easily attainable.
Looking back at the TopGolf acquisition, management opened venues in suboptimal locations and over-extrapolated the post-COVID boom. In Q4 2024, they recorded a $1.45B impairment charge related to TopGolf. Same‑venue sales have declined since Q3 2023 and are expected to continue through Q4 2025.
Jack Wolfskin
Acquisition (2018): $476m purchase price
FY 2018 performance: $380m revenue; $40m EBITDA
FY 2024 performance: $348m revenue
2025 guidance: ~$340m revenue; $13m EBITDA
Jack Wolfskin’s performance has been poor under Callaway’s ownership. Revenue declined 10% and EBITDA declined 67% over the 7-year holding period.
Artie Starr recently stepped down from his position at TopGolf to accept a position at Harley-Davidson. Recent results at TopGolf show few signs that he was a good CEO. Current CEO Chip Brewer’s history of capital allocation has been subpar. Whether it’s the Jack Wolfskin or TopGolf acquisition, or $50m of buybacks in 2021-2022 at an average price of $24.80, repurchasing 2.9m shares in 2023 at $16.37. Since Chip Brewer took over in March 2012, Callaway (Ticker: ELY) traded for ~$6.5/share. Since then, the stock returned 26%. No comparison to any index or comp is needed as it’s pathetic. Chip should not be the CEO of the company.
Risks
Inventory & Promotional Environment
With all four major clubmakers launching new drivers and fairway woods in 2025, retailer inventories are elevated—likely leading to softer order volumes from manufacturers, including Callaway. Excess stock heading into the fall launch season may further compress demand as retailers clear prior‑generation merchandise. Promotional intensity is at its highest in years, with Callaway leading the pack on aggressive trade‑in allowances and club discounts.
Historical Bad Acquisition & Questionable Management (see above)
Board entrenchment is a significant risk here, and the entire board should be turned over. One has to be worried about whether the board is there to take fees or deliver shareholder returns.
Spin-off/Sale falls through
In Q4 2024, management announced plans to sell or spin off TopGolf to address the valuation gap, targeting completion by the end of 2025. As of July 24, 2025, no spin documentation has been filed, and ongoing TopGolf deterioration—combined with high fixed costs—could derail the separation. Balancing debt capacity between entities remains critical. The $290 m Jack Wolfskin sale boosted pro forma cash to $612 m (pre‑FCF), enhancing financial flexibility. If the TopGolf spin or sale fails to materialize, the remain‑co’s cleaner deleveraging thesis would be compromised.
Headline Risk for Q2 - Sell-side estimates still include Jack Wolfskin Results
Estimate revisions will be to the downside once the sell side adjusts estimates to factor in the completion of the Jack Wolfskin. FY2025 revenue guidance will be revised down; this noise needs to be sorted through to determine what the core change in revenue is. This added step can, at times, result in confusion.
Catalyst Path
Q3 2025
Release of Happy Gilmore 2 – Potentially drives increased rounds and/or brings more attention to golf
Q4 2025
Ryder Cup at Bethpage – NYC – More attention to golf
Potential Sale of TopGolf
1H 2026
Easier comps and release schedule - Taylormade and Callaway are the only brands releasing new drivers/Fairway Woods.
Operational efficiencies and cost reduction plan announced.
Spinoff of TopGolf if a sale is not announced
2H 2026
Likely an Investor Day to discuss the standalone go-forward strategy
2026 & 2027
Deleveraging Story
Standalone Callaway Business earnings power is demonstrated - EPS estimates for the combined company over the next three years are a loss, yet, standalone Callaway is significantly profitable. Many investors shy away from “unprofitable” companies, deeming them too risky. Post separation, the strong club, TopTracer, and apparel earnings power will open the door to new potential buyers.
