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Nicholas Kitonyi
Nicholas Kitonyi
Articles  | Author's Website |

Garmin Is Gaining Favor After a Turbulent Period

Company is integrating into the wearable tech market

Analysts seem to have restored their faith in Garmin (NASDAQ:GRMN), as the stock looks to recover after a turbulent period that started in August and stretched into mid-September. Shares of Garmin appeared to have hit the slippery floors of Wall Street last month when they nosedived from a high of close to $56 on Aug. 1 to a low of about $46 on Sep. 14.

However, recent analyst report ratings suggest that things could be about to turn positive again, with just 3 of 18 analyst recommendations suggesting that investors should sell their holdings.

These reports—together with the anticipation of a strong third quarter—have spurred the shares of Garmin to recover about 1.70% as of Sep. 26, trading at $48.35. This could be a sign that investors are beginning to put their trust back in Garmin and the stock could possibly get on another rally. Or, it could be that new buyers are coming in after the recent decline.

Another thing that could be helping Garmin to recover is the fact that the consumer electronics company also has a year to date (YTD) return of 30.10%, which means that the recent slip is more like a pullback, rather than a sign of a major slowdown. In addition, Garmin enjoys a strong dividend yield of 4.22%, which should give investors a reason to look at it further going forward.

Is Garmin Still a Value Investor’s Play?

Garmin is mostly known for its in-car GPS system. However, it has recently seen impressive growth rates in areas outside the automotive industry. The Fitness, Outdoors, Marine and Aviation segments grew an impressive 20% and contributed to an astounding 70% of Garmin’s $812 million in revenues in the last quarter. The company is shaping itself to become the go-to supplier when it comes to auxiliary technologies in these markets.

The revenue reported in the second quarter was way above the consensus estimate of $763.37. However, Garmin’s earnings for the quarter increased mildly by 4.9% as new players in the market continue to force prices downwards. Garmin will report third quarter results on Oct. 26 and this has kept analysts and investors alike guessing as to what the outcome would be in both the top line and the bottom line.

Garmin expects its outdoor products sales revenues to increase in the coming quarter. Last quarter saw 27% growth, which was primarily driven by the company's wearable devices. Garmin is expected to continue researching and investing in new products, as well as continued investment in the marketing and sales departments. The company business model is anchored on key operational ethos amongst them, continuous innovation, performance, integrity and dedicated support.

Most companies forget that if you are engaged in the technical side of the market, then customer support is critical. Garmin is one of the few companies whose supports services can be accessed via a telephone number, and even third-party platforms offer Garmin Customer Service through various channels.

For other companies, you are most likely to receive support via mail, contact form, live chat and possibly forums, but telephone support is usually limited. Garmin certainly does not have all the resources to throw punches with the likes of Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Samsung Electronics (SSNLF), but it holds a key card in support.

The company’s core business continues to incline more towards wearable and fitness devices, putting it in direct rivalry with the industry giants mentioned above. The company also seeks to invest more towards reinvention and innovation as it seeks to remain competitive in a market that even startups are looking to stake their claims.

Bottom Line

As the world changes around us, we are changing as well. With more consumers starting to pursue healthier and active lifestyles, Garmin—and other fitness and wearable devices companies—are looking to explore this exciting niche in the technology sector. 

Innovation and reinvention will certainly enable Garmin to stay competitive, but its dedicated customer service could also play a part.

Meanwhile, investors will be waiting anxiously for Garmin to report its third quarter earnings on Oct. 26. With forecasts already showing that the company’s earnings are going to grow, the stock’s price could be set for another rally.

Disclosure: I have no position in any stock mentioned in this article.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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