Garmin designs and builds GPS navigation and communication devices for automobiles, planes, and boats. They began making sports watches in 2003, and recently in the last few years have been designing a line of smartwatches and fitness trackers comparable to Apple Watches and Fitbit, but are more specialized and targeted towards more serious athletes, allowing them to occupy a good position in a niche market.
Based on qualitative and quantitative analysis (DCF), we recommend Garmin as a buy and hold for 2 years, or until the equity price reaches $62 per share. Several of the highlights of our reasoning include the following.
- Garmin has diversified its product offerings in light of its declining GPS unit division and has proven that it can become an industry leader in other markets, competing with Apple and Fitbit in the wearables sector.
- Garmin has experienced considerable market share growth in wearables due to its specialized designs for specific activities (swimming, running, etc.).
- Valuation analysis using a conservative DCF model suggests that Garmin is undervalued.