Is Garmin about to Head North?

February 24, 2009 at 10:01 pm Leave a comment

The leading GPS maker Garmin (GRMN) has been hit very hard in this recession.  In addition to suffering along with other electronics manufacturers due to declining consumer spending, Garmin’s stock was affected by twin fears of GPS commoditization and competition from cell phones.  As a result, its stock now fetches only about an eighth of its high back in 2007.

Today, Garmin posted sharply lower earnings and revenues for Q4 2008, but these were not as bad as expected.  In addition, the company reduced inventory and suffered only a slight decline in margins, which is very impressive in current environment.  It also gained market share — indeed, its main rival TomTom lost money last quarter and warned that it could be in breach of its loan covenants from the purchase of TeleAtlas (for which it had to pay a very price forced on it by Garmin’s bidding war).

It is clear that Garmin is going to emerge a much stronger company at the end of this recession.  Take a look at this post for more discussion on its prospects.

Entry filed under: Stock Ideas.

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Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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