Goldman Sachs Sees Downside for Garmin (GRMN) and Cuts Rating to 'Sell'
Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.
(Updated - August 24, 2016 8:44 AM EDT)
Goldman Sachs downgraded Garmin Ltd. (NASDAQ: GRMN) from Neutral to Sell with a price target of $46, implying downside of 14%. Analyst Simona Jankowski said the stock's P/E was "rich" and warned of decelerating fitness growth, along with downside to consensus estimates.
"The stock is +44% ytd (vs. a 10% increase in CY16E EPS) and is trading near a peak P/E of 21X (30% above its 5-yr. median). We expect shares to underperform from here as the key Fitness/Outdoor segment slows from 29% growth in 2Q16 to 7% in 2Q17E (the stock has a 71% correlation to yoy growth in Fitness/Outdoor, which is 45% of revenues/54% of profits)," said Jankowski. "We also see $0.07 downside to 4Q Street EPS largely owing to a 14th week of opex that seems under-modeled. We view the stock’s 21X P/E as rich relative to its 1% FY15E-17E EPS CAGR."
Discussing catalysts, the analyst said, "We see three key catalysts over the next few months: 1) In September, we expect high profile product launches from competitors, including Fitbit (with the Flex 2 and Charge 2 activity trackers) and Apple (Watch refresh). 2) While fitness products were a hot seller over the past two holiday seasons, this holiday season they will see increased competition for consumer wallets from a few new emerging consumer electronics categories, including VR headsets, home assistants and drones, which are expected to drive $1bn in incremental sales in the US alone this year, equivalent to a quarter of the Fitness category. 3) Garmin will face the step-up in direct and share-ofwallet competition during a period of increasingly difficult comps, as it laps its own strong product cycle driven by commercializing its Elevate wristbased heart monitor technology over the last three quarters (4Q15-2Q16)."
Shares of Garmin Ltd. closed at $53.67 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Mizuho Securities Downgrades Community Health (CYH) to Underperform
- Oppenheimer Raises Price Target on Capital One Financial (COF) Following 3Q Report
- UPDATE: Oppenheimer Downgrades Williams-Sonoma (WSM) to Perform
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Downgrades, Hot Comments, Hot Downgrades
Related EntitiesGoldman Sachs
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!