Garmin Weathers a Changing Landscape but Remains Confident in Fundamentals; Shares Attractive

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.