Company Reports

We maintain our $132 fair value estimate for shares of narrow-moat Garmin after the firm reported good first-quarter results that were in line with our long-term thesis. Garmin’s results exceeded our expectations, but management maintained its full-year guidance, which implies a more moderate progression from this strong quarter. Garmin’s profitability was especially good in the quarter, but we now expect levels to remain consistently around this level through the rest of the year. Shares popped more than 10% after the release, which we see as a short-term reaction to a good quarter despite the company maintaining its full-year outlook. We now see shares as overvalued.

We are raising our fair value estimate for narrow-moat Garmin to $132 per share from $124 after the firm reported fourth-quarter results above FactSet consensus and our expectations. We are impressed with Garmin’s ability to deliver on revenue growth and profitability thus far, despite end market headwinds. As shipping bottlenecks ease and demand momentum improves, we expect a healthy boost in revenue, profitability, and cash flow for the firm in 2024. We continue to believe the firm’s long-term value is solid, as Garmin’s industry-leading products lie at the core of its customers’ functions. Management laid out its 2024 targets, which came in higher than our top-line expectations but slightly lower than our bottom-line estimates due to changing revenue mix. With shares up around 11% upon market open, we view the stock as fairly valued.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

In its third quarter, Garmin surpassed our top- and bottom-line expectations, leading to a rosier guide from management for the full year. Highlights of the quarter included wearables demand in fitness thanks to launches of the new Venu 3 smartwatches and vivoactive 5. In addition, adventure watches carried outdoor strength—setting up the company for what we think will be a solid holiday season. Despite the pleasant earnings results, we are slightly tapering our fair value estimate for the narrow-moat company to $124 from $129 per share as we moderate our explicit forecast for free cash flow. Nonetheless, we continue to believe Garmin’s future looks bright, with ample revenue growth and margin expansion in store. While we do not consider the fitness segment to be moaty, we believe our optimism in this sector is where we differ from the market—as we think the effect of pandemic-related health trends persists to some degree and there is enough room in this market for Garmin even with large competitors like Apple. Shares are up around 10% upon results, near $113 per share—leaving the stock attractively priced, even with our slight fair value cut.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

Garmin reported solid second-quarter results, with revenue in line with our model and earnings per share more uplifted than we expected. Management increased full-year guidance for revenue to $5.05 billion due to strong sales this quarter.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

Garmin reported fair first-quarter results, with revenue coming in comfortably above FactSet consensus, while earnings per share were slightly below. Overall, the quarter was defined by a tale of two segments: a tough compare for the outdoor segment—and an exceptional quarter for aviation as Garmin sells into a wider array of aircraft models. However, we think the outdoor tough comparison is a good problem to have and expect continued fluctuations in the outdoor segment based on watch releases. As a reminder, we believe Garmin is a narrow-moat company based on strong switching costs seen in three of its five segments. Given that we consider aviation to be a moaty segment, we think it is especially beneficial that this segment is strengthening its customer base via new aircraft models. With guidance for the year maintained, we are reiterating our $129 fair value estimate for Garmin, leaving shares attractive for long-term investors. While we had lowered our fair value estimate for the firm last earnings as a result of moderating the impact of COVID-19-induced tailwinds in fitness, we still believe the market is not baking in enough of a lasting impact of the pandemic on health and outdoor-related habits.

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.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin, after shedding most of its auto segment, will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

Narrow-moat Garmin reported third-quarter results that missed our top-line expectations but came largely in line with our margin expectations. As demand has normalized to prepandemic levels, we see tough comparisons hold for the third quarter across Garmin’s fitness products. On top of the changing demand landscape, Garmin and its peers continue to navigate currency headwinds from a strengthening U.S. dollar and elevated inflation. Accounting for near-term headwinds, management lowered its full-year revenue guidance while raising its bottom-line estimates based on a strengthening margin outlook. We are maintaining our $140 fair value estimate and view the current share price of $86 as a great entry point for long-term investors. We believe the current share price overlooks the long-lasting impacts of the pandemic on outdoor and active lifestyle habits of consumers and remain confident in Garmin’s established market position of supplying best-of-breed products.

Narrow-moat Garmin's second-quarter earnings disappointed as they missed our top- and bottom-line expectations. Endurance let up in the workout of beating tough fitness comparisons as demand has normalized to prepandemic levels. On top of tough fitness comparisons, Garmin is not immune to the macroeconomic headwinds of a strengthening U.S. dollar and elevated inflation as well as interest rates. Due to these headwinds, we are lowering our fair value estimate for Garmin shares to $140 from $150. Despite our revision, we reiterate our confidence that Garmin shares are still attractively priced. In our view, Garmin's current stock price of $95 overlooks long-lasting impacts of the pandemic on outdoor- and fitness-related habits of Garmin's customers—even if this quarter's results adjust the extent of that influence, and margin expansion that comes with such scale.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin, after shedding most of its auto segment, will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

In its first quarter, narrow-moat Garmin beat our top-line expectations while coming in below our bottom-line estimates, as the firm invests further into its OEM capabilities and continues tackling supply chain constraints. Despite a conservative maintained outlook for fiscal 2022, we believe Garmin will maintain its position as a navigation powerhouse. We see ample long-term growth ahead for Garmin, fueled by COVID-19-induced activities, which we think the market has been significantly underestimating. We are maintaining our fair value estimate for Garmin of $150 per share. With shares trading around $109 per share, we believe Garmin is an excellent buying opportunity.

In its fourth quarter, narrow-moat Garmin came in well above management's and our non-GAAP earnings expectations thanks to revenue and operating margins clocking in above guidance as Garmin went the distance even with a tough compare. Despite a mixed 2022 outlook that is tainted by supply chain issues, metrics indicative of long-term health are stellar in our view. We think that Garmin will be able to weather the tough short-term terrain ahead in pursuit of a more normalized, favorable margin profile--to pair with immense demand for Garmin offerings. As we roll our model for the new year ahead, we are increasing our fair value estimate for Garmin to $150 per share from $143 per share. With shares trading around $118 per share, we think now is an excellent time for investors to buy Garmin stock at these coordinates given implied upside near 30%.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin, after shedding most of its auto segment, will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

Narrow-moat Garmin is one of our top picks in the technology sector, as our fair value estimate of $143 per share offers nice upside for long-term investors. Pandemic-induced habits such as more time spent outdoors or increased importance on fitness have served Garmin well, and we think will have long-lasting benefits to Garmin's business. But even more important than these market-related tailwinds is the fact that we consider Garmin to benefit from significant switching costs and intangible assets in three out of five segments--which contribute to the majority of its operating profits. We think the mission-critical nature of its aviation, marine, and outdoor offerings make switching from Garmin products difficult in isolation--but paired with the Garmin name and the immense trust it carries with its clientele makes such switching nearly impossible. This shows in Garmin's financial results, leaving Garmin an attractive chart to course for investors, in our view.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin, after shedding most of its auto segment, will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.

In its third quarter, Garmin surpassed FactSet consensus for the top and bottom line--a tough feat considering a hard compare with massive pandemic tailwinds seen in 2020 and current elevated supply costs. The outperformance gave Garmin increased confidence in its expected 2021 results, as outlook was raised. While our long-term forecast remains largely unchanged, we have reconsidered Garmin’s cost of equity and now deem its rating to be “below average” instead of its former rating at “average.” As a result, we are increasing the fair value estimate for the narrow-moat company to $143 from $113 per share. Shares are down 7% upon results, near $150 per share--leaving the stock fairly valued, in our view. Overall, we continue to believe that Garmin’s tailwinds from the pandemic will be long lasting and that switching costs, aided by strong brand perception as the industry standard in its markets, will remain strong.

Garmin specializes in GPS-enabled hardware and software for recreational as well as defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin, after shedding most of its auto segment, will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.