Garmin Reports Solid Q4 but Outlook Underwhelming; Shares Attractive Given Resilient Moaty Segments

Garmin posted a relatively solid fourth quarter given currency headwinds, reporting revenue in line with our forecast and earnings per share surpassing our model. However, management guided for a weaker outlook for the year than we were bracing for, partially due to less of a recovery from fitness segment normalization than we were expecting. This has long-term implications, in our view, as we think it indicates that pandemic habits have been easier to break than once expected, moderating the overall TAM. As a result, we are lowering our fair value estimate to $129 from $140 per share. Nonetheless, with shares hovering near $98 per share, narrow-moat Garmin’s shares remain appealing through our eyes. We remind investors that while Garmin’s fitness segment is substantial in size, we do not see it and the auto segment as contributing to Garmin’s narrow moat. Instead, we view outdoor, aviation, and marine as Garmin’s moaty crown jewels, and thus, we found it comforting that these segments held up the best in 2022, posting record full-year revenue.