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UPDATE: JPMorgan Cuts Garmin (GRMN) to Underweight on Decelerating Growth in Fitness

July 30, 2015 6:37 AM EDT
Get Alerts GRMN Hot Sheet
Price: $146.01 +0.18%

Rating Summary:
    6 Buy, 17 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 2 | New: 35
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(Updated - July 30, 2015 10:05 AM EDT)

JPMorgan downgraded Garmin Ltd. (NASDAQ: GRMN) from Neutral to Underweight with a price target of $40.00 (from $42.00). Analyst Paul Coster pointed out decelerating growth in the fitness segment, but he doesn't recommend shorting the stock.

"We are trimming estimates to reflect decelerating growth in the fitness segment, reducing our 2016 PT to $40.00, and downgrading GRMN to Underweight to reflect our view that the stock will underperform the mean of our coverage over the next 6-12 months, absent catalysts and an obvious path back to revenue growth in the next two years," said Coster. "2Q results were in line with the negative preannouncement, and it is clear that the Fitness and Marine segments have tougher comps ahead. Meanwhile the PND segment continues to decline, but now with reducing benefit from the addback of deferred margin."

"We do not recommend shorting this stock, owing to $12.77 of net cash, a dividend yield of 4.7% and active buybacks, but we do not expect the stock to appreciate meaningfully, near-term," added the analyst.

Coster added, "Fitness growth and margins have decelerated as the segment laps difficult comps, not least owing to resurgence of the market leader, Fitbit (FIT/NC). The firm has signaled that SG&A and promotional pricing will increase, near-term, in a bid to regain market share in fitness. Marine surprised to the upside, but again comps get tougher in 2H as the segment laps the Fusion acquisition done in late June. PND was down double digits, aligned with industry trends. Aviation came in lower than expected, as new aircraft sales have been light, and 3Q operating margins should come in lower owing to increase in R&D."

For an analyst ratings summary and ratings history on Garmin Ltd. click here. For more ratings news on Garmin Ltd. click here.

Shares of Garmin Ltd. closed at $42.69 yesterday.



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