Core Thesis - Topgolf Callaway Brands Corp. is positioned for significant upside due to its strong fundamentals and strategic separation of its TopGolf Entertainment business, expected in 2026 [2][5] Company Overview - As of October 15th, Topgolf Callaway's shares were trading at $9.30, with trailing and forward P/E ratios of 98.91 and 156.25 respectively [1] - The company is preparing to spin off or potentially sell its TopGolf Entertainment business, which has been underperforming, while the core business remains strong [2] Financial Metrics - Callaway trades at approximately 5× projected 2027 EPS and 1.2× EV/Sales, indicating significant upside potential compared to competitors like TaylorMade and Titleist [3] - The projected 2027 EPS for Callaway is $1.57, with scenarios suggesting a potential upside of 70% to 160% [5] Market Dynamics - The golf industry is experiencing macro tailwinds, including increased participation from females and juniors, and a growing number of rounds played annually [4] - There is a replacement cycle for golf clubs, particularly for drivers, irons, and wedges, which positions Callaway to capture premium spending [4] Revenue Streams - TopTracer technology, which covers 24,000 bays globally, is generating recurring high-margin revenue and is expected to provide a 15% uplift to EBIT [3] - The sale of Jack Wolfskin has reduced leverage and improved the balance sheet, enhancing financial flexibility for the company [5] Strategic Considerations - Despite challenges such as inventory glut and promotional pressures, Callaway maintains strong brand recognition and favorable product placement [4] - The standalone Callaway business, focusing on high-margin clubs, apparel, and TopTracer, presents a compelling investment opportunity supported by operational growth and strategic options [5]

Core Thesis - The bullish thesis on Topgolf Callaway Brands Corp. (MODG) highlights the investment opportunity created by the upcoming spin-off of its TopGolf Entertainment business, which is expected to enhance the valuation of the remaining company focused on premium golf clubs, active-lifestyle apparel, and the TopTracer platform [2][5]. Financial Metrics - As of September 4th, MODG's share price was $9.12, with trailing and forward P/E ratios of 98.91 and 156.25 respectively [1]. - The remaining company trades at approximately 5× the projected 2027 EPS of $1.57 and 1.2× EV/Sales, indicating a valuation significantly below peers like TaylorMade and Titleist, suggesting substantial upside potential [2]. Market Dynamics - The core golf business is benefiting from COVID-era demand tailwinds, an impending club replacement cycle, and increased golf participation, particularly among women and juniors, which expands the addressable market [2]. - TopTracer, a gamified ball-tracking technology, is installed in over 24,000 bays and represents a high-margin recurring revenue stream, with potential for a 15% EBIT uplift through incremental sign-ups and pricing power [3]. Operational Strengths - Callaway's core brands, including TravisMathew, Ogio, and Callaway apparel, maintain strong market positioning and premium perception, supported by solid consumer demand despite temporary inventory challenges [3]. - The recent sale of Jack Wolfskin for $290 million has improved the company's balance sheet, enhancing financial flexibility for debt reduction or reinvestment [3]. Growth Catalysts - Multiple catalysts for growth include the impending TopGolf separation, macro golf tailwinds, and under-monetized TopTracer revenue, which could offer potential upside of 70%–125% over the next two to three years [4]. - Even without the spin-off, Callaway's core business presents attractive value and a clear deleveraging path, positioning it as an underrecognized opportunity in the golf and active-lifestyle sectors [4].