Market Overview

Garmin Stock Is Crashing: Needham's Richard Valera Explains Why

Garmin Stock Is Crashing: Needham's Richard Valera Explains Why
Related GRMN
Earnings Scheduled For February 21, 2018
JPMorgan's Top Tech Ideas For 2018: Buy Zebra, Short Garmin
Garmin Ltd. 2017 Q4 - Results - Earnings Call Slides (Seeking Alpha)

In a report published Thursday, Needham analyst Richard Valera maintained a Hold rating on Garmin Ltd. (NASDAQ: GRMN).

Garmin pre-announced preliminary 2Q15 results with in-line revenues and lower-than-expected gross and operating margins due to forex headwinds and pricing pressures. Increased R&D and advertising expenses drove the company's EPS lower.

The company expects its 2Q15 revenues to be in the range of $770-$775MM with gross margins and operating margins expected to be 54 percent and 21.5 percent, respectively. The softness in the company's fitness segment is expected to have been offset by market share gains in the Marine segment.

"Concerns on the competitiveness and potential negative margin implications of Garmin's new markets such as Fitness trackers, smart watches and action cameras have been one of the factors keeping us on the sidelines," analyst Richard Valera said.

Valera pointed out that although the company had reiterated its full-year revenue guidance, it had reduced its earnings guidance significantly. The company expects to post 2015 revenues of $2.9 billion with annual fitness revenue growth projected to grow by 25 percent, driven by sell-through improvements and new product launches in the second half.

Garmin has guided to full year gross margins of 54-55 percent, lower than the earlier guided 56 percent, mainly due to continued currency headwinds and aggressive pricing. Increased R&D and advertising are expected to restrict the company's operating margins, guided to 20-21 percent, down from the earlier guidance of 23 percent, the report noted.

The company has reduced its EPS guidance for 2015 from $3.10 to $2.65.

Latest Ratings for GRMN

Feb 2018BairdMaintainsNeutralNeutral
Feb 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Nov 2017Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for GRMN
View the Latest Analyst Ratings

Posted-In: Needham VetrAnalyst Color Reiteration Analyst Ratings Best of Benzinga


Related Articles (GRMN)

View Comments and Join the Discussion!