On Monday, JPMorgan maintained a Neutral stance on Garmin Ltd . (NYSE:GRMN), with a consistent price target of $185.00. The firm's evaluation is based on Garmin Connect's performance, which showed a slight month-over-month decline in downloads for September but continued a trend of year-over-year growth.
Garmin Connect, the companion app for the company's fitness products, experienced a 4.2% decrease in downloads in September compared to August. However, this decline is less than the average historical drop of 7.1% for this period. Despite the month-over-month decrease, there was a 13.2% year-over-year increase in downloads for September, marking nine consecutive months of such growth.
On a quarterly basis, Garmin Connect downloads increased by 2.8% in the third quarter of 2024, surpassing the historical average of a 0.5% increase from the second to the third quarter. The app also saw a 9.7% year-over-year rise in the third quarter, continuing a pattern of growth for seven straight quarters.
These download trends are seen as supportive of the revenue forecasts for Garmin's Fitness and Outdoor segments for the third quarter of 2024. The projections include a JPMorgan estimate of $878 million, which would represent a 1.1% increase from the previous quarter and an 11.6% increase year-over-year. The consensus estimate stands at $859 million, indicating a slight quarter-over-quarter decline but a 9.1% year-over-year increase.
JPMorgan highlights that while the recent trends in app downloads have been above seasonal expectations, the moderation in growth during the third quarter compared to the second suggests that the upcoming holiday season will be crucial to watch.
Investors are advised to be mindful of potential fading momentum in the face of recent product launches and a sluggish macroeconomic backdrop. This caution comes as Garmin's shares are trading at approximately 27 times the next twelve months' (NTM) projected earnings.
In other recent news, Garmin Ltd. has been the center of varied analyst evaluations. Morgan Stanley downgraded Garmin's stock from Equalweight to Underweight, lowering the price target to $139, citing a potential slowdown in revenue growth and contraction in gross margins for the upcoming year. On the other hand, Tigress Financial Partners maintained a Strong Buy rating on Garmin and increased the price target to $215, highlighting the company's strong performance and new product launches.
Garmin reported a 14% increase in consolidated revenue for the second quarter of 2024, totaling $1.51 billion. This growth led to an increase in full-year revenue guidance to approximately $5.95 billion and pro forma EPS to $6. Barclays, however, expressed concerns about the sustainability of Garmin's momentum and the company's high valuation.
Garmin International, a unit of Garmin Ltd., recently received certification for its G5000 integrated flight deck for use in Cessna Citation XLS+ and XLS Gen2 business jets. This certification offers pilots advanced functionalities and operational efficiencies.
InvestingPro Insights
Garmin's recent performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 14.92% over the last twelve months supports JPMorgan's observation of continued year-over-year growth in Garmin Connect downloads. This growth is further reflected in Garmin's strong financial position, with a market capitalization of $31.22 billion and a P/E ratio of 22.63, which is lower than the 27x NTM earnings mentioned in the article.
InvestingPro Tips highlight Garmin's financial strength and shareholder-friendly policies. The company holds more cash than debt on its balance sheet, indicating a solid financial foundation. Additionally, Garmin has maintained dividend payments for 22 consecutive years and has raised its dividend for 7 consecutive years, demonstrating a commitment to returning value to shareholders.
These insights complement the article's focus on Garmin's app performance and revenue projections. With 12 additional tips available on InvestingPro, investors can gain a more comprehensive understanding of Garmin's financial health and market position.
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