GRMN Stock: Garmin Ltd. Is a Rising Threat with Wearables

GRMN Stock
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Garmin Is Bursting Higher in Smartwatch Sales

When you think about wearable technologies, Fitbit Inc (NYSE:FIT) will likely be your initial thought, but I’d rather look to Garmin Ltd. (NASDAQ:GRMN). Yes, it’s that maker of portable GPS devices for your vehicle, but here is something you may not know: Garmin Ltd. has rapidly become the second-top seller of smartwatches.

There is some indication that the market for fitness bands is topping and giving way to the rising demand for the smartwatch.

Think of it this way: why would someone want to wear a band and a watch at the same time?

While it is true that the band also tells time, I simply don’t see it as being sought after for everyday use versus the smartwatch, which is often both fashionable and functional.

I have long viewed Fitbit as more of a fad stock that is vulnerable to competition and changes in taste. I was bearish on Fitbit stock way up at over the $50.00 mark. Even after the recent crash down to the $8.00 level, I’m still not biting.

Look at the comparative results: Fitbit stock is down 71% year-to-date while GRMN stock is up 42%.

This price divergence reflects the popularity of their respective wearables.

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Chart courtesy of StockCharts.com

Fitbit is seeing a steady decline in its market share, as the demand for smartwatches rise. This may be a reason why Microsoft Corporation (NASDAQ:MSFT) decided to halt sales of its fitness band.

My Long-Term Bull Case for GRMN Stock

In the third quarter, Apple Inc. (NASDAQ:AAPL) was the leading shipper of smartwatches, with 1.1 million units shipped, but it was down 71.6% year-over-year. On the other hand, Garmin Ltd. saw its shipments surge a whopping 324.2% to 600,000 units, to claim second place, as far as market share goes. (Source: “Smartwatch Market Declines 51.6% in the Third Quarter as Platforms and Vendors Realign, IDC Finds,” October 24, 2016).

As we move forward, the view is that the demand for smartwatches will likely continue to be strong, with Apple and GRMN stock at the top.

The popularity of the Garmin Ltd. smartwatch is the company’s strength in GPS technology in mobile devices. Garmin Ltd., in looking to expand its product offering, has adapted its GPS technology to develop extremely popular smartwatches for active users.

Garmin Ltd. can continue to strengthen its market share by launching new applications for its smartwatch in areas such as sports and recreation, marine, aviation, health and wellness, and wearables.

The price of Garmin stock is at around $52.00, which is above its average consensus target price of $48.00. If the company can further develop its wearable technologies segment, the market could reward GRMN stock with upside moves.

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Chart courtesy of StockCharts.com

The chart of GRMN stock shows multiple breakouts after a sideways channel. In each case, Garmin Ltd. moved higher. But it will likely not be easy this time around as Garmin stock is approaching a retest of resistance at around $56.00, which previously failed.

The relative strength is also reaching a multi-month high. The last time it traded at this level, GRMN stock retrenched about $9.00.

Garmin stock is fairly priced, but keep an eye on the smartwatch market, especially on major price weakness as suggested on the chart.


Editor’s Note: Hi, George Leong here. If you enjoyed this article, you can get more of my opinions and commentaries in our popular daily tech letter, Profit Confidential. Published daily, it’s FREE! Join us when you click here now.