GPS Giant Garmin: Headed Due North - Barron's

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GPS Giant Garmin Keeps Driving by Jay Palmer

Summary: GPS giant Garmin's (GRMN) shares ($80) have rallied more than 150% since last February. Escalating car-GPS sales in the U.S. and Europe boosted revenue 73% to $1.77 billion in 2006, while EPS climbed a robust 64% to $2.35. Analysts expect EPS of $2.89/share in 2007, and $3.28 in 2008. Dougherty & Co. analyst Jeff Evanson notes that marine and aviation markets have yet-to-be tapped by GPS devices. He says Dutch rival TomTom is struggling to find footing in the U.S., where Garmin controls 50% of the market. He also notes that Garmin just recently began selling units through Wal-Mart (WMT). Bearish analysts like Bank of America's Ron Tadross say share prices already reflect the company's growth prospects. He cedes that sales of portable navigation devices will continue to grow at a 110% annual clip, but worries about market share being usurped by other GPS players, and pre-installed car systems. Barron's is unimpressed by the opposition: Sony (SNE) introduced an unimpressive unit last year, while Garmin continues to roll out cheaper mass-market units, and still caters the demand for innovation at the high-end. Despite record demand, the percentage of drivers who own GPS systems remains low. Evanson says shares could hit $93 over the coming year.

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