Garmin Ltd. (GRMN) Offers Mixed Guidance and Credit Suisse Explains Why It Doesn't Matter, PT Raised to $129
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Credit Suisse analyst Rpbert Spingarn raised the price target on Garmin Ltd. (NASDAQ: GRMN) to $129.00 (from $107.00) after the company reported Q4’20 sales/EPS results of $1,351m/$1.73 vs.Street $1,183m/$1.40. The 14% sales beat in GRMN’s biggest quarter was driven by exceptional growth rates at Marine/Outdoor/Fitness of 48.2%/39.7%/26.4% and a reacceleration of Automotive growth to 11.2%, led by Auto OEM sales where mix reached 44% of segment sales (vs. 29% in Q4’19). The 2021 guidance was mixed with strong sales guide at $4.6bn (~6% above Street) but operating margins of 23.5%, ~160bps shy of Street, resulting in EPS of $5.15, or $0.03 below Street.
The analyst stated "Given the competitive environment, as well as the opportunity in front of GRMN, we view higher R&D as a “high quality” rationale for a slightly below-street guide, especially in the inflecting Automotive business where contracts are in-hand. Indeed, when paired with mgmt’s aggressive capex plan for 2021, it suggests continued growth momentum beyond 2021 as GRMN executes against its large and growing TAM. And while margins are pressured near-term, we see scope for renewed expansion here to drive a reacceleration of earnings growth in ‘22/’23. Thus, while we reiterate Neutral on valuation, we lean more positive here compared to other Neutral-rated stocks given our view of the road ahead".
while maintaining a Neutral rating.
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