ELY - Callaway Golf

[Sportgamma]

I´d be very interested to see if anybody here has looked into Callaway Golf. After a series of dissapointments, the shares are trading at 60% of book value. In my opinion, the market value of Callaway Golf (ELY) common is getting very close to the liquidation value of the shares.

 

Here is a quick back-of-the-envelope attempt to kill the company using the statements of the 2010 annual report:

http://sportgamma.files.wordpress.com/2011/08/kill-callaway.jpg

 

According to this rough estimate, the per share  liquidation value is in the region of $5 which would indicate a relatively limited downside risk as shares trade around $6 at the moment.

[ericd1]

Sports - recent Barrons article on Calloway was positive about company's recent earnings improvement and future prospects. Downside is general decline in golf business. Perhaps the new generation of pc kids won't take up the sport. The article captured my attention when it talked about the decline in market value (not sure I can remember the numbers but I think it was) from 2B to 200M. Might be worth a further look.

 

 

 

[Guest Hester]

I've often wondered how so many golf companies, like Callaway and Adam's Golf, have so much trouble consistently making money. The sport strikes me like it would present good economics. Affluent customers, brand loyalty, a somewhat razor blades aspect to it, albeit plenty of cyclicality (anyone who's watched me golf knows that people can go through golf balls quickly).

 

I guess it's customer acquisition and retention costs from competition.

 

This company isn't worth more than tangible book in my opinion, due to that fact.

[augustabound]

As a lifelong golfer I can say the only brand loyalty is to golf balls.  The equipment is like technology (Apple, Microsoft etc), whoever has the best club at the time make the money. 

If someone has a Callaway driver and Taylor Made comes out with their next great driver then people generally don't have a problem switching.