Outdoor financials: Garmin casualty of falling GPS pricing

Garmin was a casualty of falling GPS pricing.
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Garmin casualty of falling GPS pricing

Analysts at Deutsche Bank and Wedbush Morgan expressed concerned about rampant discounting of GPS devices and its effect on Garmin (Nasdaq: GRMN), bringing down their target price for the company's stock.

Deutsche Bank's Jonathan Goldberg cut his target to $14 from $18. He noted in a client note that personal navigation devices (PND) prices were down 35 percent from last year, "and seem unlikely to recover."

He said Garmin products, which used to sell at about a $100 premium to second-tier brands, now sell for a premium of only about $20. He wrote in a client note, "Many consumers are trading down," with low-price point products selling, while higher-priced items "remain untouched." He has a "sell" rating on Garmin.

Wedbush Morgan's Scott Sutherland cut his target on the stock to $19 from $26. He cut his 2008 EPS estimate to $3.63 from $3.72; for 2009, he goes to $3.14 from $3.52. The estimate cuts, he wrote in a client note, reflect "a weakening consumer, likely leaner channel inventory, and channel checks." He maintained a "hold" rating.

RBC Capital's Mark Sue said that strong unit growth in the current quarter could be offset by lower margins as device pricing falls. Sue wrote in a research note that "low barriers to entry in the PND segment, pricing and the growth of converged devices may create headwinds for the company." He kept his "underperform" rating on the stock.

Garmin shed $1.63 to hit $15.40 for a day's low on Dec. 1. It closed at $15.53. Its 52-week range is $14.40 to $112.68.

--Compiled by Wendy Geister

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