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TRYING TO PREDICT THE FUTURE OF CALLAWAY AND COBRA
Published April 19, 1995
The appeal of oversized woods and clubs from Cobra Golf and Callaway Golf is examined by Leslie Norton of BARRON'S. The "surging popularity of oversized clubs goes a long way toward explaining" why both companies became "stock market darlings" after going public a few years ago. But both stocks have "slipped" in the past few months and they have been the "subject of much debate" on Wall Street. Last week, Merrill Lynch downgraded Callaway, noting concerns on slowing sales of oversized woods as well as uncertainties associated with the company's new extra-large wood. While CNBC's Dan Dorfman continues his "bullish pronouncements" on both, BARRON's Norton notes that more rivals are turning out their own versions of oversized woods and new technology could slow sales for Cobra and Callaway even more. Another "new threat" to Cobra and Callaway are the mid-sized clubs. If midsized woods were to steal some of the oversized crowd, "it would be a repeat of what happened in tennis." Jumbo rackets were popular, but then sizes settled back to something closer to the old standard (BARRON'S, 4/17 issue). LOOK AT THE NUMBERS: Cobra reported net income of $10.4M for the quarter ended March 31, a 132% increase from net income of $4.5M in '94. Cobra's net sales increased by 106% to $56.2M in '94. Cobra attributes the increase in sales in income to continued demand for all of its oversized products and increased marketing efforts (Cobra).