Analysts from JPMorgan changed their rating for Garmin (NYSE:GRMN) from Overweight to Neutral, setting a price target of $135.00. According to the analysts, the downgrade is due to anticipated limited growth potential, following an adjustment of their revenue projections. This adjustment is based on a cautious view of consumer spending after a strong holiday season, influenced by new product releases and inventory buildup.
Additionally, the earnings forecast has been significantly lowered due to the potential impact of a higher corporate tax rate in Switzerland, which might affect earnings per share by approximately 30 cents. Despite this, the December 2024 price target remains at $135, calculated at about 23 times the target multiple, aligning with Garmin’s recent trading multiple and slightly below the current near-term multiple.
This valuation is supported by a Sum-of-the-Parts (SOTP) analysis, with Garmin’s traditional hardware segments valued between 20 to 25 times, while the Auto OEM segment is valued lower, at around 15 times, reflecting its alignment with automotive sector peers and considering the risks related to customer concentration and financial challenges during its growth phase.