Garmin Looks Good Following Earnings

May. 4.07 | About: Garmin Ltd. (GRMN)

Garmin's (NASDAQ:GRMN) earnings report was quite fantastic. According to Associated Press, net income grew 60 percent to $139.9 million, or 64 cents per share.

The only negative thing here is that the cheaper dollar inflated their EPS by 5 cents. Revenue increased 52 percent to $322.3 million as sales in the auto/mobile segment more than doubled to $316.6 million. Then why is the stock down? Well, margins are shrinking as prices across all units are being slashed aggressively. Units are now selling for as low as $200.

Consequently, the company missed revenue estimates by 1%. However, I liked the fact that demand is so high that Garmin is adding production lines at its Taiwan manufacturing plants and may buy a third plant. I believe the sell off was an over-reaction.

Newer products in the forthcoming quarters will boost margins. I believe shares might come in some more and while I would not open a new position unless the stock hits $52, I encourage those who own it to stick with it. Pending any market sell offs, the stock will treat you well.

GRMN 1-yr chart: