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Pacific Crest Highlights 4 Drivers Of Increased Demand For Garmin Shares

Pacific Crest Highlights 4 Drivers Of Increased Demand For Garmin Shares
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Pacific Crest raised Garmin Ltd. (NASDAQ: GRMN)'s EPS estimates to $2.32 from $2.27 for 2016 and to $2.38 from $2.27 for 2017.

In the report published Wednesday, the analysts also raised their growth assumptions for the year to 13 percent from 8 percent for the outdoor sector and to 12.8 percent from 7.8 percent for fitness. According to them, channel checks and improving opportunities for the holiday pushed them incrementally more positive on Garmin's outdoor and fitness growth.

Related Link: Fitbit Ripe For Takeover With Samsung And Apple's Commitment To Wearables

4 Drivers

The analysts provided four drivers for Garmin share's improving demand trends:

1. Fitness demand is showing signs of life.

"We think Fitness has found an increasingly good foothold on a few fronts, first through trackers, where our checks indicate that sales improved on a relative basis versus competing devices for the first time since we started following the category more than two years ago. Second, we believe the company's GPS running watches have continued seeing strong demand, which has been an underappreciated portion of Fitness operating profit," wrote Pacific.

2. Opportunity for holiday share gains appear to be ripening.

Garmin has a good opportunity to gain market share through the year, given that Fitbit Inc (NYSE: FIT) probably launches only activity trackers for the holiday season and not an update to its Surge GPS-enabled running watch.

3. ADS-B limits downside to aviation.

The checks with resellers show ADS-B upgrades are driving a significant amount of new business and a multi mullion dollar opportunity for the company over the next four years, despite the fact that stock market volatility and oil and gas weakness remain the two biggest headwinds for aviation.

4. Investors want yield.

"With nearly a third of the company's market cap in cash, a rock-solid 4.6 percent dividend yield at current levels and 20 percent free-cash flow margins, the quality of GRMN as a cash-generating asset is still formidable by any traditional standards. With potential further volatility in equities and interest rates likely to remain low, GRMN's attractiveness to value investors and dividend seekers could continue to rise," said Pacific.

At time of writing, Garmin was up 0.70 percent on the day at $44.62.

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Latest Ratings for GRMN

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

View More Analyst Ratings for GRMN
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