Garmin Shares Slashed To Sell At Citi

Citi downgraded Garmin Ltd. GRMN from Buy to Sell and cut its price target from $68 to $42.

Analysts Jeremy David and Ehud Gelblum believed that growth in Garmin's GPS fitness watch business was "likely to stall" and that Outdoor revenue could decline year-over-year.

"We now believe competitive pressures are likely to start eroding Garmin's stronghold in the GPS fitness watch business which generated ~60 percent of Garmin's Fitness sales last year. Specifically, [Apple Inc. AAPL], Fitbit and TomTom are likely to target runners with their own offerings, ultimately reducing GRMN's ~75 percent share," according to David.

The analysts also felt that the company set "the bar too high" in its revenue forecasts for 2015 with its "yet to be introduced next-gen action cam" while Outdoor segment revenue was expected to disappoint investors with slowing shipments of GPS devices.

David concluded that "Garmin is likely to miss on revenue and EPS in Q1 as it did not ship in volume its new vivoactive and vivofit 2 vs. expectations of a mid-Q1 launch when the products were announced at CES, while the Fitbit product cycle is another source of downside risk."

The firm lowered 2015 and 2016 EPS estimates from $3.17 and $3.33 to $3.00 and $2.88, respectively. The new 2015 and 2016 EPS estimates were $0.12 and $0.38 below Street estimates of $3.12 and $3.26.

The $42 price target was based on a 14x multiple applied to the 2015 EPS estimate of $3.00.

Garmin recently traded at $46.01, down 1.02 percent.