Deutsche Bank Downgrades Garmin, Sees Greater U.S. Competition

One of the consequences for consumer electronics companies of this week’s Consumer Electronics Show going on in Las Vegas is that it’s easier for Wall Street’s bean counters to peruse and scrutinize all players in a market in a couple of days of meetings. Such was apparently the case for portable navigation device maker Garmin (GRMN), whose shares were downgraded this morning by Deutsche Bank analyst Jonathan Goldberg, who reports that after “checks at CES,” he’s concerned Netherlands-based competitor TomTom may gain an edge this year.

“In our meetings, we came away with the sense that TomTom is determined to gain further share in the US,” writes Goldberg, “and may prove more aggressive than previously expected to achieve those aims.” The result could be a price war, he writes.

Mind you, Goldberg says last quarter probably was better than expected for Garmin as the company probably held more share than people expect, and he thinks profit margin in the current quarter could rise. But based on the prospect of heightened competition, Garmin shouldn’t get a premium multiple, he thinks.

At yesterday’s price of near $80, Garmin had an 18 times forward P/E multiple based on Goldberg’s estimate of $4.40 per share in earnings for this year. Goldberg thinks the stock can trade a little higher than that, at $90, but not the $125 he previously gave the stock.

Well, Wednesday investors are heading for the exits: Garmin is down nearly 12% at $70.78.

Comments

[Long-ShortGuy]

No sign of this yet -- Garmin still holds 7 out of the 10 bestselling GPS navigators on Amazon:
doiop.com/hgd2e9