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Garmin Unveils NEO 2T Smart to Sustain Fitness Momentum

Zacks Equity Research

Garmin Ltd. GRMN has rolled out an indoor cycling trainer called NEO 2T Smart from Tacx in a bid to strengthen its fitness product offerings.

We note that the latest product creates indoor training simulation by reacting instantly to speed. Also, it helps in controlling a rider’s mass inertia with the help of its dynamic inertia.

Additionally, the product comes with a redesigned rear axle making it compatible with other bikes.

The product leverages Tacx software, which offers more than 100 videos featuring steep hills of the Alps, cobblestone roads of Milan and many more.

Hence, Garmin with the help of the new product will be able to deliver the experience of virtual riding through famous world routes to the cyclists. Moreover, NEO 2T Smart can be synchronized with Zwift app, which will help cyclists experience the feeling of riding on surfaces like cobblestone and gravel.

We believe that the training features and the feeling of virtual riding are likely to deliver enhanced fitness experience to the users. Moreover, these features make the product attractive and will aid in its adoption rate.

Bike Trainer Market Holds Promise

Per a report from Orbis Research, the global indoor bike trainer market is expected to hit $140 million by 2025, by growing at a CAGR of 7.6% between 2018 and 2025.

NEO 2T Smart is equipped with capacitive left and right sensors that measure leg position with accuracy. This helps in improving power distribution and performance of the cyclists.

Further, the bike trainer allows fitness freaks to upload GPS and ride on 3-D maps while creating workouts based on Functional Threshold Power, slope, power and heart rate. Additionally, users can race against live opponents.

Hence, NEO 2T Smart bike trainer makes Garmin well poised to gain traction in this booming market.

The latest launch expands the company’s portfolio of bike trainers, which also includes NEO 2 Smart, FLUX S Smart, Flow Smart and Satori Smart, to name a few. Strong portfolio will aid the company in reaping benefits from this particular market.

Garmin Ltd. Revenue (TTM)

Garmin Ltd. Revenue (TTM)

Garmin Ltd. revenue-ttm | Garmin Ltd. Quote

Tacx Buyout Bodes Well, Fitness Segment to Grow

Tacx was acquired by Garmin in the second quarter of 2019 in a bid to expand the fitness business. The buyout has added smart trainers as well as basic trainers such as Booster, Blue Matic, and Blue Twist to the fitness products portfolio.

Further, Tacx has also added rollers and accessories to the company’s fitness offerings.

Notably, Garmin’s fitness segment generated sales of $251.65 million (26.3% of net sales) in second-quarter 2019, advancing 12% from the year-ago quarter. This was driven by the company’s well-performing running wearables and positive contributions from Tacx buyout.

We believe all these products, along with the latest bike trainer, are expected to drive top-line growth within the fitness segment of Garmin.

Zacks Rank & Other Stocks to Consider

Currently, Garmin carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the borader technology sector are Itron ITRI, Fortinet FTNT and Anixter International AXE. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Itron, Fortinet and Anixter is currently pegged at 25%,15.5% and 8%, respectively.

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