Garmin Limited (NASDAQ: GRMN)

Garmin Limited (GRMN) is a worldwide vertically integrated maker of global positioning systems (GPS) products, navigation, communications and other information products. The Company operates four separate segments, including Automobile/Mobile, Outdoor/Fitness, Marine and Aviation.

Founded in 1990, the Company is headquartered in Olathe, Kansas.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

The mean of 21 analysts polled by Thomson Reuters rate shares of GRMN a “Hold.”

Analyst Recommendations and Revisions

Source: Reuters.com, SEC Filings.

Historical Surprises

Source: Reuters.com, SEC Filings.

Investment Highlights

General Market

The Global Positioning System (GPS) is a space-based satellite constellation that broadcasts radio signals to communication devices, computers and software to provide reliable positioning, navigation and timing information for a variety of functions. Signals generated from the GPS are available to the public for stand-alone and embedded applications.

GPSs are growing in importance especially in logistics and transportation services. Awareness of the technology, lower prices of the devices, and increasingly user-friendly features have driven demand.

Leading markets of Western Europe, U.S. and Japan have experienced increasing demand for traffic information and navigation applications. Leading markets for GPS technologies include consumer electronics, automotive, aerospace and defense. In all, the worldwide market for GPS technology-based products, services and applications is expected to reach $757 billion by 2017, according to a 75-page report published by market research firm, MarketResearch.com.

Competition Threat to Company

GRMN operates within the personal navigation device (PND) market. Market competition and depressed economic conditions have weighed on the industry players recently due to historic troubles in the banking and credit markets and anticipated technology giant Google’s recent entry into the market.

Recently released information (late October 2009) contained within Dutch competitor TomTom’s earning report also reveals that pricing for its GPS devices was lower-than-expected, dropping to 99 Euros from Wall Street’s expectations of 109 Euros-giving rise to the thesis of more difficult market environment. TomTom management didn’t offer guidance for the upcoming holiday season.

When compared with Google and Motorola (the maker of the new Droid phone), industry leaders GRMN and TomTom may not be able to operate as profitability in a falling sales-price environment, giving Google and Motorola the potential upper hand in the enormous revenue potential of the smartphones market–presently leading the Personal Navigation Devices (PND) space.

Subscriptions for navigation services run approximately $100 per year on top of the device cost. Google’s ability to almost, or literally, give the technology away through a competing device spells trouble for the Company (and TomTom). Memories of investors burned by software makers running up against Microsoft run deep in the minds of technology followers.

The Company will have to have an answer to Google Navigator, now available on iPhone and Android–Google’s open-source cellular operating system. Industry sources believe that the momentum toward Google’s Android and Maps may overtake Apple’s iPhone, scrambling investors out of GRMN for now. Google’s dominance in Web advertising may be only the first victory in the fight for eyeballs, with the second fight for the mobile ad industry just heating up. The Company’s prospects within the consumer market may become more difficult over time.

Technical Analysis

GRMN trades below its 13-day moving average. This bearish sign is significant because the moving average are recently negatively trending as well.

The MACD for GRMN currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average of the MACD. The MACD is also below the critical level of 0, which implies the past price action had been negative. Overall, the chart is bearish, with consolidation above $28 as the next target.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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