- Merrill Lynch is upgrading Garmin (NASDAQ:GRMN) to Buy from Neutral with a tgt of $60. Firm believes the personal navigation devices (PND) market remains robust and Garmin will retain its dominant market position through at least 2008.
New players must gain shelf space at the large retailers, but given lead time requirements, retailers have largely chosen their products for the holiday season and in our opinion, the SKUs will lean toward Garmin products. Most introduced products, with the exception of TomTom, lack the functionality and form factor to compete with Garmin's products. It is firm's opinion that the market, as well as Garmin's competition, underestimate the difficulty in creating a product that translates the mapping data into an accurate, user-friendly format.
They agree with the rest of the Street and investors that margins will decline; however, where we differ is the pace of margin deterioration. In avionics, Garmin is the low-cost disruptor and will be a significant player (threat) to incumbent players. Firm expects Garmin to achieve FAA Part 25 certification in the next two to three years and take a meaningful position on larger business jets in the future.
Firm is raising their 2006 EPS forecast to $2.05 from $1.89, which is above management's revised forecast of "to exceed $1.95" (post-split). They are also raising 2007 EPS forecast to $2.50 from $2.25, which is significantly above current consensus of $2.29.
Notablecalls: Are you convinced by this call? Can't say I am. GRMN has a history of selling off after gapping up. Would keep a close eye on the stock above the $51 level in order to spot cracks in buy interest.
New players must gain shelf space at the large retailers, but given lead time requirements, retailers have largely chosen their products for the holiday season and in our opinion, the SKUs will lean toward Garmin products. Most introduced products, with the exception of TomTom, lack the functionality and form factor to compete with Garmin's products. It is firm's opinion that the market, as well as Garmin's competition, underestimate the difficulty in creating a product that translates the mapping data into an accurate, user-friendly format.
They agree with the rest of the Street and investors that margins will decline; however, where we differ is the pace of margin deterioration. In avionics, Garmin is the low-cost disruptor and will be a significant player (threat) to incumbent players. Firm expects Garmin to achieve FAA Part 25 certification in the next two to three years and take a meaningful position on larger business jets in the future.
Firm is raising their 2006 EPS forecast to $2.05 from $1.89, which is above management's revised forecast of "to exceed $1.95" (post-split). They are also raising 2007 EPS forecast to $2.50 from $2.25, which is significantly above current consensus of $2.29.
Notablecalls: Are you convinced by this call? Can't say I am. GRMN has a history of selling off after gapping up. Would keep a close eye on the stock above the $51 level in order to spot cracks in buy interest.
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