Zacks Investment Research downgraded shares of Garmin Ltd (GRMN) from OUTPERFORM to UNDERPERFORM on April 08, 2013, with a target price of $31.00.
Garmin is an OEM of GPS-based equipment. December quarter earnings missed the Zacks Consensus Estimate and guidance for 2013 was also disappointing. The primary concern for Garmin is the secular decline in the PND business, which the company has not been able to make good with share gains or growth in other areas. We think that its OEM strategy across key segments and improving conditions in the aviation segment will not be enough to offset the declines in its largest business segment. We expect margins to also remain under pressure, as the company sees growing competition, increasing pricing pressure and is forced to invest heavily in R&D in order to generate future growth. Therefore, despite its share buyback plans and steady dividends, the shares deserve to be discounted. We therefore downgrade GRMN shares to Underperform.
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