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Garmin's Biggest Problem? It's Hard To Pick Just One

Garmin's Biggest Problem? It's Hard To Pick Just One

Shares of Garmin Ltd. (NASDAQ: GRMN) were trading lower by 1.52 percent during Thursday's pre-market session after the company reported its second-quarter results on Wednesday.

Here is a summary of what Wall Street's top analysts are saying.

JPMorgan: No Catalyst, No Obvious Path To Growth

Paul Coster of JPMorgan commented in a note that Garmin's second-quarter results revealed growth and margin deceleration in its Fitness segment, PND (Personal Navigation Devices) saw double-digit declines, Aviation came in lower than expected while Marine surprised to the upside, but comps will only get tougher moving forward.

Coster said there are no immediate catalysts or paths to return to revenue growth that can support the stock. However, the analyst cautioned against shorting the stock given a net cash position of $12.77 per share, a 4.7 percent dividend yield and an active buyback program.

Shares were downgraded to Underweight from Neutral with a price target lowered to $40 from a previous $42.

Pacific Crest: ‘Challenging' Growth Prospects

Brad Erickson of Pacific Crest commented in a note that Garmin's poor results were mostly due to a weak performance in its Fitness division and currency headwinds. With that said, the analyst stated that the Fitness division should "improve sequentially," but the company's overall long-term outlook "appears unstable."

Erickson continued that the Fitness division has "its work cut out for itself" to offset declines in other divisions as the analyst estimated PND and Outdoor profits likely fell a combined 30 percent year-over-year in the quarter.

However, Erickson suggested that downside in Garmin's stock "appears limited" given the 4.8 percent dividend yield. Nevertheless, with concerns surrounding competition over the longer-term, it is difficult to see a period of meaningful growth.

Bottom line, Erickson stated that he needs to see more evidence of sustainable Fitness sell-through before he could become constructive on the stock.

Shares remain Sector Weight rated with no assigned price target.

DA Davidson: Revisit Shares In The High $30 Range

JB Groh of DA Davidson commented in a note that Garmin still maintains a "rock solid" balance sheet with zero debt and approximately $13 per share in cash and investments.

However, Groh noted that he is still "skeptical" of growth expectations in some of the company's segments. The analyst singled out the company's Automotive and Mobile segment that continued to show double-digit declines at a time when the market is becoming overcrowded with new feature-rich products that are competitive priced.

Groh concluded that he would "revisit" shares on a valuation basis in the high $30 price range as there would be "significant" yield support at that level.

Shares remain Neutral rated with a price target lowered to $48 (approximately 13 times FY16E EPS of $2.70 net of cash and investments) from a previous $50.


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