EUR 850.00 For Business Accounts Only

Morningstar | Strengths in Garmin's Aviation, Marine, and Outdoor Segments Continue

Garmin is a leader in global positioning system-based devices. Although the firm is best known for its portable navigation devices, or PNDs, used in cars (which is a business in secular decline), it has a strong position in niche markets such as outdoor, marine, and aviation. We believe this narrow-moat firm can continue to increase revenue in those markets to offset the decline in the auto segment. Further, we expect Garmin to generate long-term excess returns and continue distributing dividends with attractive yields to shareholders.Garmin remains one of the leading providers of GPS mobile navigation devices. Its products use information from orbiting satellites to determine the location of its devices and provide various navigation options. As one of the first movers, Garmin became the leading provider of GPS-enabled PNDs to consumers for use in their cars. That market peaked in 2008, after which many substitute products, mainly navigation apps on smartphones, were introduced for free or at far lower prices, resulting in more than a 50% decline in Garmin’s PND revenue since 2008.However, Garmin has maintained a position in other niche markets that have been profitable and growing. For example, the firm has been delivering technology products for boats and aircraft, where GPS accuracy and reliability are critical because of the possible dire consequences if the navigation system malfunctions. Customers do not want to run the risk of losing such a system while flying or in the middle of the ocean where no cellular signals exist. Some barriers to entry in these markets, such as compliance costs possibly brought forth by government regulations, may also prove to be advantageous for Garmin.While Garmin also has become one of the top consumer wearable device providers in the fitness space, we believe it faces fierce competition from Fitbit, Apple, and Samsung. Ultimately, we believe Garmin may have to compete on price, possibly compressing margins in its fitness segment. Overall, however, we think growth in the outdoor, marine, aviation, and fitness segments will continue to offset the declining auto segment.