Garmin, founded in 1991, is one of the largest manufacturers of GPS equipment in the world. But where the company gained its name and fame because of the pure GPS equipment, it has now grown into a global player in a much larger market than could ever have been suspected at the time...
Especially the wearables for numerous sports have become enormously popular these days and where once the emphasis was almost exclusively on functionality, nowadays at least as much attention is paid to the trendy and fashion content of the product line. Otherwise, just surf to the Garmin website. Gone are the typical and not very sexy GPS devices, you are immediately seduced by beautifully designed smart watches around the wrists of good looking sporty men and women.
The website lists no less than 6 different segments with specific products :
Garmin's product catalog is now represented on land, at sea and in the air, and where previously the automotive sector accounted for the lion's share of sales, Garmin has managed to turn the corner, so that the fitness and outdoor sector now accounts for almost half of total sales.
Garmin reported record operating income of $1.22 billion, up 16% over 2020. GAAP EPS was $5.61 and pro forma EPS(1) was $5.82, representing 13% growth over the prior year pro forma EPS. For detailed information about the full-year and fourth quarter 2021 results, you may read the full press release here.
Just over 6 months ago, Garmin was trading at a price well above $175. Since then, the price has plummeted to +/- $106.5, a drop of nearly 40% in a span of just 6 months.
Garmin recovered sharply last week, on Friday price quoted 8.9% higher than at the beginning of the week. For a similarly strong rise (+10%), we have to return to the week of November 2, 2020. The rise back then happened with a lot of volume and considerable momentum and broke through the resistance level at $105 that was in place until then.
Technical traders seem to have taken advantage of the current price drop to the earlier breakout level to pick up the stock again, and they may well be right at these price levels. The solid price decline seems excessive when compared to the recent quarterly and annual results. The company has a very strong and differentiated product line and continues to focus on innovation. The current market conditions are of course far from ideal, price movements are (very) volatile and thus not very predictable. Further price declines due to a possible worsening of geopolitical tensions can therefore not be excluded.
But with an expected average growth of more than 10% for the next 5 years, combined with a reasonable dividend yield of 2.61%, the current price level undoubtedly offers opportunities for the long-term investor.
*This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Read our full Disclaimer.