Wealth curve

Garmin shares soared 17% to a 11-year high

Outdoor sports enthusiasts are igniting the demand for smart wearable devices. US GPS company Garmin rose 17% on Wednesday, and its stock price reached an 11-year high.
Garmin released its earnings report on Wednesday, February 20. The company's outdoor business sales in the fourth quarter rose significantly, up 23% year-on-year. Garmin specifically mentioned that Adventure Watch is a major contributor to the rise in outdoor business, with gross margins and operating margins rising to 67% and 38% respectively.
Investors have previously worried that Garmin may face fierce competition in the mid-season price cuts in the fourth quarter. However, the wide range of Garmin's business makes the company effective against seasonal factors.
Garmin's main business covers the aviation, marine, automotive and sports fitness markets. The market for portable navigation devices (PND) shrank and vehicle sales decreased. Garmin's automotive business fell 28% year-on-year in the fourth quarter. However, with the boost of outdoor, aviation and marine businesses, overall revenue growth was still 4%.
Garmin's adjusted earnings per share for the fourth quarter was $1.02, up 26% year-on-year. The company also estimates in the performance guidance that revenue in 2019 is about $3.5 billion, exceeding market expectations of $3.43 billion.
"In 2019, we saw many opportunities in front of us and we are confident that we are ready to seize these opportunities," said Garmin CEO Cliff Pemble.
Garmin's gross margin reached 59%, much higher than the competitor's Fitbit's 39%. Bloomberg quoted Ivan Feinseth, chief investment officer at Tigress Financial Partners, as saying that Wall Street has been underestimating Garmin's share price.
Other wearables companies also rose after Garmin's earnings report, indicating an expected increase in demand for the wearable market. Smartwatch company Fitbit closed up 4% on Wednesday and fashion brand Fossil rose 0.8%.
In the wearable market, Garmin has many other competitors, including Apple, Xiaomi, Samsung, Sony, Adidas and Nike.