Garmin Will Recover From Navteq-Based Selloff

Fortunately from a timing standpoint, I cashed out half my position in Garmin (GRMN) last week when it was already up close to 50% in just a couple months. No, unlike Acquantive (AQNT), I didn't call this takeover the day before; it was just a general valuation call.

I cut my stake in several holdings, especially China. But I'm still long the rest of the position regardless of the news that Nokia is looking to take out Navteq. The market overreacts, and I think GRMN will be back at its previous highs within short order. NVT was already up practically to Monday's purchase price over the past month in anticipation of a buyout. This announcement was priced in by the smart money. It's the speculators who got nervous and sold out today.

Primarily, people aren't going to start purchasing and using cell phones (and paying the requisite premium fees) for GPS when they are pretty much standard in all new cars and continue to make gifts and add-ons in the short term. Phones didn't kill MP3 players - they didn't kill digital cameras - and they didn't kill gaming systems, even though most phones now come with these capabilities.

Phones are phones, at least in the US. Granted, in South Korea and Japan, people rely on their phones for much more, but the US hasn't caught up yet. It will be some time until any impact to GRMN is evident.

Reiterating a moderate buy recommendation on GRMN.

Disclosure: long GRMN

Comments

[User 110305:]

Interesting though, but much of the Garmin business relies on the Navteq data. With Nokia in control, it is Nokia who sets the prices and not Garmin. With TomTom in control with TeleAtlas this may be good news are margins stay up.

An other alternative would be for Garmin to buy their own mapping company, after all they work together with many small local map makers and also with AND. This company AND might be very interesting since they recently announced to offer high detail data of Europe as well.

2007 Oct 02 09:56 AM