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GRMN Garmin leader in GPS positioning cheap and growing. August 17, 2006

Posted by deminvest in GRMN Garmin Stock, growth stock, Single stocks, stock I own, stocks.
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GRMN is the leading maker of global positioning systems [GPS]. A GPS is something mounted on fancy cars of rich people (affluent they say…) who cannot find their way and on boat of any kind.

[ PLEASE READ COMMENTS TO THIS ARTICLE! ]

GARMIN is growing amazingly fast:

Qtrly Revenue Growth (yoy):63.50%

Qtrly Earnings Growth (yoy):66.20%

It is getting cheap: Forward P/E 2007:10.29


Garmin’s Q2 report on August 2th was another blowout. Earnings per share came in at $1.10 versus estimates of $0.94 and the company raised guidance for all of 2006.

I read somewhere on the Internet (please check, don’t trust anybody suggesting a stock! Never do) that it is gaining market share in Europe and is kicking butts of its competitors. That is enough for me to put my monthly $1000 savings right on GRMN… Even though the lack of reasonable dividends by Garmin is something I hate.

I will place an overoptimistic order to buy 25 GRMN at anyprice at market opening today.

Comments»

1. deminvest - August 17, 2006

Doing some more little research I found out what is wrong with Garmin and why it is so cheap:

GPS market is getting more crowded and GPS equipment prices will go down. It did cost $1000 to have a good navigation GPS system on a car, but now handheld GPS navigators can be found anywhere at $150. It seems also that other giants like Sony are planing to sell GPS systems.

I may cancel my order for GARMIN

2. deminvest - August 17, 2006

I did cancel my order.

It is not that I don’t like GARMIN. I just got the doubt that GPS prices may fall due to competition. You all may have noticed how cheap GPS devices are becoming. We are starting to see around the first cellphones with GPS.

A scenario like that would make 2007 Earnings of GARMIN much less sure.

I just have doubts. I don’t thoink I will jump in today.

3. imalittlefish - August 17, 2006

1,000 GPS devices at $1,000 is 1,000,000
1,000,0000 at $150 is 150,000,000
You do the math …
GRMN long

4. mbalzes haree - August 17, 2006

You’re a retard!

5. len - August 18, 2006

good grief.. mbalzes haree what makes u say that? that’s very hurting. hmmm anyway, u are entitled to ur own kingdom of feeling and opinion but i do not want to hear it….asshole..lol

6. deminvest - August 18, 2006

Imalittlefish, yes, but if it costs Garmin $155 to make one GPS and a Chinese producer can make a similar GPS for $130, then Garmin is in big trouble.

Garmin’s products are becoming a standard, a commodity with little innovation inside. More and more companies can prodice them and prices are heading down. GPSs are becoming like Mp3 players USB memory pens: so cheap that they can be made only in China.

7. imalittlefish - August 18, 2006

You probably don’t know much about GPS, it is more than a USB memory stick or an MP3 player.
The maps are a primary factor in how good a GPS is, interface has to be just right to be able to use it in a car or people will not use it, the software is a lot more complex than simply shuffeling a song list.
Garmin can make their devices for as low as any other company in the world can go, they own several plants in Taiwan but they have the advantage of a large (very large) base of customers who adore the Garmin brand and swear by it so they can even ask a premium.
Garmin’s stock does some weird motions and playing with it a little can give some good results but I’ll always keep a large portion as a long term position, Garmin IS the 900pound gorilla in the GPS market!
Good luck finding a better company than Garmin!

8. imalittlefish - August 18, 2006

One more thing, Garmin would not sell their GPS for $150 if it costs $155 to produce (they don’t do shady economics), they’d sell it at about $200 and still outsell the Chinese $130 device 10 to 1 on quality, support, innovation and product availability!

9. deminvest - February 20, 2007

on August 17 Garmin price was 46.73 now it is 55.7.

GRMN went up 20%, beating Nasdaq which was only up 15%

looking at some numbers of today, we notice that GRMN is growing faster both Revenue and Earnings. Maybe my worries were misplaced.

Qtrly Revenue Growth (yoy): 91.40%
Qtrly Earnings Growth (yoy): 107.00%

But it is more expensive now, because of that 20% price hike

Trailing P/E (ttm, intraday): 23.74
Forward P/E (fye 30-Dec-08) 1: 17.76

10. Connor H - July 13, 2007

Disclosure: I am long this stock, and am a VERY happy owner of one of their gps devices. I am quite an idiot when it comes to directions, but not as an investor and this is STILL a buy. They have the best technology, a loyal fan base, and a HUGE market that hasnt been tapped yet. Yes, there are many concerns regarding pricing, but I don’t think you should be too worried… think about it- Do you REALLY think the Chinese or any other country will be able to come up with Garmin’s technology before they have saturated cars everywhere with their GREAT device. Besides, you really only have to only buy a GPS device once… so paying 500 bucks ONCE is probably worth it over paying 150 bucks for a worse product- also, they have many diff. types of GPS devices and can expand on their existing one’s. For example, they could add a device where parents could always check where the devices exact location was… so they could know where their daughter was late at night… etc etc… this is a great product with an unsaturated market with great new possibilities… Im long.

11. deminvest - July 14, 2007

Connor, my decision not to buy GRMN was obviously wrong. I took Chevron (CVX )for my August investment instead.
Since I wrote this post (AUG 17) Garmin went up 92%.
My pick, Chevron, only went 38% up.

I make many investment mistakes. Overlooking GRMN was one of them.

Now with forward P/E = 25 and PEG= 1.7, I think it may be to expensive. I hope for you that I’m wrong again and Garmin does greatly again.

12. Jack - July 16, 2007

When grmn went public I cashed in everything and my 401k and bet on grmn.
Every body said not to but what do they know.Sometimes you just have to roll the dice.Boy did the dice roll.

13. deminvest - July 17, 2007

Great move Jack!

Now that you obtained such great gains, it may be a good time to divest your initial investment and keep remaining Garmin shares. That way you get all your money back and can keep a great amount of free GRMN shares.

14. moiliiliquarry - August 2, 2007

Wow. Jack, what was GRMN’s pps when you went all in?

Dem, you remember how I missed the boat on BIDU? I feel like I did the same with GRMN. Though I’d read and done my DD, I didn’t feel comfortable enough with the Co to take the numbers seriously. Then the day before earnings, I thought about entering at $83. I passed even though I was sure they’d have a big Q2.

Now GRMN is at $92 and I’m sad. Forward P/E is 27. I wonder how much higher it can go.

15. Kevin - January 15, 2008

GRMN has dropped to $66. I have been interested in GRMN for a while but it has been to expensive. What do you think now?

16. deminvest - January 15, 2008

I think it is a good price. Even seems a bargain with forward P/E around 15.

But the market is full of bargains nowadays. The question about GRMN should be the same as for every other stock today: how will this company be hurt in the likely event of a recession in USA?

I fear that some consumers may decide to “get there” with a paper map for a while, just to save a few bucks.

Anyway I was wrong once about Garmin and I may be wrong again.

17. Tony - January 30, 2008

GRMN’s forward P/E is just too low for a high growth company. They will release blowout earnings in late Feb…how can they not?

The entire market may crumble and take GRMN down with it, but otherwise, it looks like a screaming buy up to $85 at least.

18. What happened to Garmin stock (GRMN) and what can I learn from that « Democratic Investments by the people for the people - February 10, 2010

[…] maps, navigator, smartphones trackback Some time ago Garming was a powerful fast growing company. On August 17 2006 I decided not to buy Garmin (GRMN) shares because I felt GPS service would become a commodity offered in any smartph0ne. […]


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