I have made a few calculations concerning the
Sales of 1,104,000,000
Net income 307,000,000
For the year 2007
Sales of 3,067,000,000
Net income 974,500,000
I know these appear lower than many on this board would like to thnk, but the production capacity increase to 16,000,000 units per year is only a 20% increase from what was already in place (11,560,000/yr). With a finished product inventory of $297,000,000 (approx 1,325,000 units) and a total production capacity of 4,000,000 units per quarter, we can expect a total sales of perhaps 4,500,000 units this quarter. Add in the marine and aviation with reasonable increases in sales in line with full year Garmin management guidance, and you come up just short of 4.00 for the year. With recent EPS multiples, best case PPS comes in at 120 to 128 after earnings. Guidance may drive this down significantly. My projections for 2008 are not so rosey.
I realistically believe that profit margins for next year will be compressed approximately in line with manufacturing capacity increases announced at approx 20% by increased competition. With marine not big enough to significantly drive the earnings and aviation not coming on line fast enough to drive earnings next year, I am reluctantly convinced that earnings expansion will not continue at nearly the rate they have shown in the past. The company will need to bring new products and new revenue streams on line to continue the earnings growth.
I will share my spread sheet calculations (derived from past quarterly and yearly earnings reports from Garmin.) to anyone that would like to examine them and perhaps help refine the calculations to better represent the true picture and future of the company. Email me at GarminVillageIdiot@hotmail.com and I will send it to you. Thanks to Suziday, Kappa, Trout, and others that showed me potentially useful analysis could be done with public information.
I am currently long, but reducing my position on rallies.
Bottom line, it doesn't matter what GRMN will do in the Q4 earnings. It's already priced into the stock. However, GRMN is priced for perfection.
What investors are looking forward to is the Q1 guidance. Watch GRMN drop like a piece of CROX!!
Whenver I read the predictions that garmin is priced for perfection or that growth will come down and competition is catching up, I tend to think the 300 shares I had of apple which I bought at an average of 70. Eventhough I was very positive about apple, I got scared and sold it off. Now I am robbed of 30,000 profit in my portfolio. All these guys who predict prices downward are short sellers trying to scare people out of their stocks.
because your message is loaded with all sorts of nos. that are not easily refutable...it carries an air of authenticity.
one thing that caught my attention is that you state sort of unequivically that there is only a 20% production increase, and that is with three factories humming.
how do you have access to this info., why should we consider it real? what if the increase is really much higher...that changes your nos. by a lot.
suggesting that hitting almost 4$ aint so great ....what????garmin has typically run in the 35 multiple range, and if more investors get interested, could easily hit 40.
so 4$ X 35=140$ and at a 40 multiple(which a company performing at this rate deserves....could be 160$
you seem to have done so much legwork that everything you say sounds believeable, however, assuming 107% pnd growth vs last years 170%...WHY....there are now many more mass market models...particularly nuvi 200 series,
consumers are much more into gps than this time last year...much more hype and demand.
so, although i have not done the scholarly research you have done....actually predicting each divisions revenues ahead of time...based on what,i don't know...it is very hard to buy your act.
i dont think anyone here ,including you has a clue for 4th quarter, except that it should be very good.
worries about future margin reduction are alway there in a high growth company, and can be made up in 1. much higher volumes 2. creative factory cost reduction and component reductions over time.
garmin's MAJOR advaantage in the end is the ability to deliver, while others sell on price and hype...and can't keep stock levels.
and we havent even addressed other markets...like southeast asia, mideast, etc...where there are hundreds of millions of drivers, who get lost more than us.
any way, i guess i doubt someone who creates year end figures and futures based on assumptions they have made up...unless you actually have records you could show that garmin is increasing capacity only 20%, when many on this board feel, they are running full out.......lucky
�one thing that caught my attention is that you state sort of unequivically that there is only a 20% production increase, and that is with three factories humming.
how do you have access to this info., why should we consider it real? what if the increase is really much higher...that changes your nos. by a lot.�
From 2007 Q3 company 10Q report:
� Completed the initial build-out of our third Taiwan manufacturing facility, increasing the number of production lines from 31 to 37, and production capacity at the end of the third quarter to an annual run rate of approximately 16 million units.
Observe � 31 X 20% = 6.2
31+6.2=37.2 thus an increase in production capacity of 20%
�so, although i have not done the scholarly research you have done....actually predicting each divisions revenues ahead of time...based on what,i don't know...it is very hard to buy your act.�
We agree � clearly you do not know what you do not know. Perhaps if you knew what I know from analyzing the company reports it would be easier to �buy my act�.
�any way, i guess i doubt someone who creates year end figures and futures based on assumptions they have made up...unless you actually have records you could show that garmin is increasing capacity only 20%, when many on this board feel, they are running full out.......lucky�
From 2007 Q3 company report - � 2.69 million units sold in the third quarter of 2007, up 119% from the same quarter in 2006; year-to-date units sold increased 97% from the same period in 2006.
Knowing the net earnings allows me to calculate an average unit price and then to calculate the number of units sold in YTD based on this cost and earnings. By the way, earnings per unit is down 20% year on year from 2006.
Additionally, with a little math, it is a fairly simple exercise to come to the estimate of PND production this year will be about 11,500,000 units (third factory was on line only for the 4th quarter). and a stated capacity (now) of 16,000,000,000 units per year � a 20% increase is a reasonable estimate.
Could Garmin's market cap in half? I believe the answer is YES!
Future margin pressures and market share errosion will knock GRMN market cap down to 13-15B from 24-25B.
I am short GRMN and adding to that side on any rally. My short term target 75-80. Today saw GRMN back under the 50 DMA again.
All this imho, of course! Good luck to all.
One thing for sure....we are heading towards earnings pre-announcement between now and early January.
All it takes is ONE big name tech company to pre-announced and the entire Nasdaq will sell off......
At the end of the day, it doesn't matter what Fed Ben does with interest rates. The driving force is all about earnings earnings earnings!
These perma bull ANAL-ysts are good at pumping stocks with Buy ratings. However, these are chicken littles when it comes to downgrading to a sell.
You have been warned!! Sell into this rally!!
I own way too much Garmin but have covered calls at 120 to hopefully let me let my short term gains mature into long term gains in 2008. The problem is that the management of this company has been flawless in ther execution. Scared the hell out of me with teleatlas but the long term contract with Navteq seems to be a solid move. (Tom Tom said their biggest customer complaint was maps. Now they have both Garmin and maps to contend with.) I think my Jan calls will be in the money by the expiration date. I like the management of this company so much I suspect I will buy back the calls.
I don't hear anyone asking what Apple or Research in Motion will do for the next round but they have just as big a target on their backs as Garmin. You can't just step in and take a chunck away from an industry leader that easily. I worry about margins and new entrants like Google.
I worry about leaving a tripple on the table.
But as this point in time this is the stock I like most - and some of my dry bulk shippers are through the roof.
I guess my point is that when you are number one everyone wants a piece of your ass. Everyone has a number of reasons why you can't stay there. Clearly Garmin's market share has to decline as well as their margins. But other than biotech can you imagine an industry that has a brighter future.
Nice analysis. Some comments.
1)"I know these appear lower than many on this board would like to thnk" Are you kidding? 3.85-4$ would be great in yearly EPS. Has anyone stated more?
2)"With recent EPS multiples, best case PPS comes in at 120 to 128 after earnings". PE ranges hit as high as 40 trailing. That would put it at 160 as best case. 120 would be an avg last 6mos.
3)Regarding manufacturing, are your numbers including the 3rd factory?
I have seen a few posts with estimates (hopes) of over 4.00.
I would like a higher multiple also, just recent history seems to support around 32.
Yes, the manufacturing numbers include the 3rd factory (37 production lines total)