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Five Reasons Garmin's Stock May Be Headed South


This holiday season, it will be the essentials consumers buy.

Shares of Garmin have been all over the map the last several years. But in which direction is the stock headed from here? I think it's more likely to stay flat or head south.

Cheesy navigational jokes aside, here are some of my thoughts on the Cayman Islands-based (note to self: send resume to Garmin) company:

1. The first thing that pops into my head is why Garmin, why now? There's competition out there, the economy isn't great, and while I certainly think that some will be dropping flash at appliance and electronic stores like Best Buy (BBY) during this holiday season and over the next few quarters, my hunch is that purchases will be more practical than in recent years. New stoves or refrigerators may be reasonable, but folks may pause when it comes to the GPS.

I'm also wondering what catalysts might emerge. For example, is it likely to exceed analyst expectations in an upcoming quarter? I don't know, which is what's giving me some pause, too. A look at data shows that Garmin has beat expectations twice and missed twice in the past four quarters, which doesn't give me much of a clue. The company is scheduled to release its third-quarter earnings on the November 4. The Street is looking for $0.69.

3. I sense that investors are looking at this stock and trading it as if people are pretty flush with coin and willing to spend, and the economy is going to keep chugging along. The Street is at $2.41 for next year. Is that a doable number? I don't feel comfortable enough to speculate one way or the other.

While there was a nice insider buy earlier in the year, as of late things seem to be on the quiet side. Ideally a little insider activity on the buy side of the equation would up my comfort level.

I'm going to wait and see what Garmin has to say when it releases. Its comments -- if there are any -- may give me a better feel for this situation. For now, I'm content on the sidelines.

Hey, have a great day!

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No positions in stocks mentioned.

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