Institutions Put A Bottom In Garmin
The insider activity in shares of Garmin (NYSE: GRMN) speaks volumes, not for their frequency and size but for the lack of both. Insiders were selling early in the year, sales were made by a wide range of execs, board members, and large shareholders, but suddenly ceased in the 2nd half. Notably, shares of Garmin peaked at an all-time high in the second half, 20% above the June closing price, and by all accounts, they are heading up to set another new all-time high in 2022. Also of note, insiders own more than 21% of the company and the institutions own most of the rest.
The institutional activity gives evidence of rotation with $1.25 billion worth of shares sold and $1.975 billion worth of shares bought at an average price near $134. The takeaways here are that the activity is net bullish to the tune of $0.725 billion which is worth about 2.8% of the company. More importantly, institutional buying held strong through the end of the Q4 period and is helping to put a bottom in the stock.
The Analysts Are Bullish On Garmin
The analysts are bullish on Garmin and the pre-Q4 release activity has already begun. Deutsche Bank upped the stock to Buy matching the Marketbeat.com consensus rating of weak Buy. Deutsche Bank also upped its price target by $12 to $160 compared to the consensus estimate of $155. The consensus estimate is worth about 16% of the upside to the stock and is expected to trend higher over the next quarter. The high price target of $202 was set by Tigress Financial in late November and comes with a Strong Buy rating. Deutsche Bank cited several factors including the company’s high-quality financial standing and range of products.
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“On the business front, we see an overdue introduction of a new model of its top wearable, the fenix, as a catalyst in CY22 helping sustain growth in its wearables business after a very strong CY20/CY21. We also see pandemic tailwinds continuing to drive growth in Aviation and Marine, but see longer-term trends like a higher adoption of private aviation and more boats on the water as positives for these business segments going forward.”
Growth Is On The Table For Garmin
Garmin received a flurry of price target downgrades in the wake of its last earnings report due to weaker than expected guidance. The caveat is that, while weaker than expected, the guidance is positive and is expecting both sequential and YOY growth. In our view, the guidance of $1.39 billion in revenue and $1.46 in EPS is cautious given the strength of consumer trends and COVID-related tailwinds blowing through the economy.
Garmin is also expected to produce a dividend increase this year. The company currently yields about 2.0% and is paying out less than half of its earnings in dividends and has a fortress balance sheet. The balance sheet is net cash, only very lightly levered, and comes with ample free cash flow.
The Technical Outlook: Garmin Pulls Back To Support
Shares of Garmin have been pulling back from a peak but appear to be putting in a bottom right now. The bottom, should it confirm, looks like a Head & Shoulders that is, coincidentally, right at the 365-day moving average of $134 and the average price for 2021. The pattern is backed up with bullish indicators that point to at least sideways trading if not a full reversal in share prices. Assuming price action is able to get over the short-term EMA we would expect to see it trend higher and up to the $175 level by mid-year.
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