Navigation devices have become increasingly popular over the years, and the leader in the United States is Garmin Ltd. (Nasdaq: GRMN).

Shares of Garmin Ltd., headquartered in Olathe, KS, soared 17% this morning from Friday’s close, giving hope to a company that has been struggling over past few months.

Its biggest issue recently has been inventory, but it was able to reduce that by $274 million in the quarter.

“It’s a sign that they may not have to price as aggressively to move the inventory in a slower economic environment,” John Bright said, analyst for Avondale Partners LLC.

Despite poor fourth-quarter results, analysts are focusing on the past year and the coming months. Garmin’s total unit shipments increased, up 15%, sales rose 10% to $3.49 billion and its outdoor and fitness sales are up 26%.

Marketwatch reported, “CEO Min Kao said Garmin experienced ‘a challenging economic environment’ but inventory reductions and Garmin’s margins for the quarter helped the company’s unit-sales increase and keep business relatively stable.”

“We continue to experience unit growth in both the North American and Asia-Pacific regions in the fourth quarter and were pleased with our market-share gains around the globe,” Kao said.

“We recognize that 2009 is going to be a difficult year and we are prepared to manage our business accordingly. While economic conditions are very challenging and are affecting most of our markets, we continue to see opportunities to invest selectively and grow our business through new product development and market share gains.”

It is also “evaluating adjustments” in order to “increase cost efficiency and match operations to market demand over the near to immediate term.”

Garmin is launching its first navigation-centric cell phones (the G60 and the M20) in select markets during the first half of this year.

Analysts seemed to have been waiting to pass judgment on this company, but with new products on the horizon, and an obvious demand for its products, Garmin’s future is looking much brighter.

Garmin Ltd. (Nasdaq: GRMN): Stock of the Day

None the less, my dad loved the damn thing. And admittedly, I have one too (because they’re a lot better!). In fact, millions of people do. Garmin’s stock soared for years on the back of increased sales of their GPS units.

But you have to wonder whether people are willing to fork out a few hundred bucks on a non-essential when they’re about to lose their homes, their car, probably their dogs too.

Remember, markets are forward looking. What this decline from $120 to $17.20 per share tells us is that the market expects consumer spending to plummet. And so far this is exactly what we’ve seen.

In the short-term, though, Garmin could actually move higher.

As you can see, the Slow Stochastic indicator (at the bottom of the chart) is currently rebounding off of oversold levels. In other words it appears that buyers are swooping in to take the stock higher. Playing a call option here might not be a bad idea.

But you shouldn’t expect the stock to move much further than $20 per share. That’s where it meets up with its long-term downward trend line.

Unless it passes $20 per share, this stock should continue to plummet for at least the next year.

This from Money Morning:

Apple Inc. (Nasdaq: AAPL) used to rule its niche world and will continue to do so, with lots of room to grow.

As Coldplay’s “I used to rule the world…” played softly on the outside stereo speakers of my sailboat “Southern Cross” as my family and I pleasantly glided by Execution Rock on a gorgeous Sunday afternoon in the Long Island Sound, I could not stop myself from thinking how the song got there.  It was coming out of my daughters’ Apple iPod, interfacing with the boat’s new iPod-ready stereo system.  And I was wondering whether it was time to get into Apple’s stock.  Yes … even on a weekend sail.

Strong Results

A few days after my family’s sailboat outing, I saw that Apple had posted its strongest results ever. The Cupertino, Calif.-based company said that it’s launching its next generation of Apple computers at higher prices – justified, as usual, by the uniqueness and hard-earned “coolness” factor that’s inherent in Apple machines.

Additionally, Apple just got Best Buy Co. Inc. (NYSE: BBY) to start selling its popular Apple iPhone in its chain of Best Buy electronics stores. And with Apple currently sitting on a $25 billion cash hoard, and having no debt, the speculation now is that Apple will launch a huge stock buyback.  After all, given Apple’s uniqueness and innovation excellence, there is little out there that could complement the company and it has a history of eschewing acquisitions.

At Friday’s closing price of $98.24, Apple shares are down about 52% from their 12-month high of $202.96. The stock is trading at 20 times earnings, but with its consistent high earnings growth, the company’s Price/Earnings/Growth Rate (PEG) ratio is less than 1.0, meaning the shares are right now priced at bargain levels.

If those consistent, predictable earnings continue, this stock is an absolute steal. But that raises the question: Will those predictable earnings continue?

For now, at least, the company seems to have all its “ducks in a row.”

While Dell Inc. (Nasdaq: DELL) and other PC makers are suffering, Apple is on a roll.  The iPod continues to rule the MP3 player market and has given birth to an entirely new, higher-end, higher-margin product, the iPhone.  The iPhone – and to a lesser, but still-important extent, Apple computers – have each been a tremendous success.

In the last quarter, Apple sold nearly 7 million units, more than five times the number of phones than in the same quarter last year.  This points to major market share gains from the estimates as recent as May. For a look at these market-share estimates, let’s take a look at Chart I:

Chart I: Wireless Phone Market Shares (By Brand)

56% Symbian (primarily Nokia)
13% Windows Mobile
12% RIMM Blackberry
9% LINUX
7% MAC (iPhone)
2% Palm
1% other
Source: Industry statistics, Money Morning Staff Research.

More importantly, Apple has recently been selling more units than the king of the enterprise-mobile phone segment, Research in Motion Ltd. (Nasdaq: RIMM) lately.  The mobile phone market is huge and has been almost doubling in size year after year.  And although growth is expected to slow a bit in the future, the profit possibilities remain huge.  Could these market growth numbers and Apple’s share gains be maintained?

To get a better idea, I started by studying the worldwide market-share sales projections for the “smartphone” market. Admittedly, these statistics harken back from before the current financial crisis really took hold in the past month or so. Still, it’s a good starting point. Let’s take a look at Chart II:

Chart II: Projected Global “Smartphone” Sales

The year-by-year and projected annual breakdown of global smartphone sales between both the high-end consumer and conventional corporate users (in millions of units).

Year Corporate          High End Consumer
2006 :                     12            +              39
2007                       21            +              77
2008                       40            +            134
2009                       74            +            219
2010                     111            +            300
Sources: Industry Statistics, Money Morning staff research.

The Competitive Landscape

To make some sense of the competitive landscape the Apple iPhone is facing, I called my friend Brenda Lewis, principal in Transactions Marketing, Inc., and a venture manager who has launched many mission-critical wireless businesses and who lives and breathes mobile phones.  I wanted to validate the industry forecasts for growth in “smartphones” – both for high-end consumers and for enterprise users.  I shared my forecasts and what I heard from Brenda was eye opening. “These forecasts for the high-end consumer are far too high now, especially given the lack of personal discretionary income in most markets,” she told me.

Of course, she is right.  Personal discretionary income has likely gone negative in the U.S. market because of high household debt and the need to replace lost retirement savings. But it’s also severely reduced in Europe and Japan, because of lower trade flows and job losses due to the global downturn.

Even so, there are roughly $5 trillion worth of stimulus packages that have been committed to the overall global economy by various governments around the world.  And we can expect to start seeing the benefits of those liquidity infusions very soon.

So the picture and slowdown we are feeling right now will “surprisingly” improve in about six months. In the meantime, economic numbers will be very tough, since the financial freeze brought the economy to an abrupt stop and unemployment is likely to spike – even from the already-increased levels we’re seeing right now.

Economic inertia is hard to shift quickly.

So until the economy turns around, it’s wise to consider other possible catalysts. For instance, what about the possibility that corporate users could adopt the Apple iPhone?  My hopes for being the discoverer of that as-yet-unknown-by-Wall Street catalyst were likely dimmed by Brenda, who said that corporate chief information officers (CIOs) “will likely use the downturn as a reason to reduce the number of devices permitted for enterprise use and to consolidate central CIO control of current business unit devices, a continuation of a trend of the past five years.”

Again, the enterprise-market segment, which she knows intimately, has two main concerns:

• Total cost of ownership, which includes the initial price for the phone, as well as the service and, very importantly the maintenance.

• Data security.

The latter one is a killer for the iPhone in the enterprise market, since corporate IT departments cannot remotely shut down iPhones that are lost or are stolen as they are able to do with Research in Motion-made Blackberries. In addition, the locked nature of the iPhone makes it very difficult for IT departments to customize solutions for company use.

So, while the iPhone is superb from the consumer standpoint for its “coolness” factor and functionality, and for the fashion statement they make for those who wear them in visible locations, Blackberries actually accomplishes many more business-critical functions for corporations, and at a lower cost. This means that Apple’s traditional consumer focus – a niche that it dominates – is shrewdly placed.

Competitive Threats for the iPhone

What about risks to the Apple iPhone’s success in its own turf – the high-end consumer?

Well, for starters, Apple faces many brewing challenges: For instance, Wal-Mart Stores Inc. (NYSE: WMT) is starting its own online music-download service, and will undercut the Apple iTunes prices by about 25%.

Wireless phone heavyweight Nokia Corp. (ADR: NOK) is operating a similar story overseas, and it is unclear how long it will take them to come to the U.S. market. More ominous is the ultra-secret plans of Internet-search behemoth Google Inc. (Nasdaq: GOOG), which has launched its own branded Google Phone, which will be sold by Walmart at a discounted price of  $148 (compared with a price of $199.99 for the Apple iPhone at Best Buy, for example).

The Google Phone is revolutionary and appeals to the spirit of the U.S. “techie” crowd: freedom.  It is designed with an operating system, called Android, that’s been tagged with the marketing slogan – “apps (applications) without walls.” The whole goal of the device is to speed up users’ ability to access and surf the Web via a mobile phone – all too often a very slow process, right now.

The Google phone also emphasizes the hottest trend in phones today, with the ability to provide “location services,” such as customized weather forecasts, directions and listings of nearby businesses and attractions.  Finally, the operating system is, unlike Apple’s, is “open source.” This means that it will be extremely easy for anyone to develop new applications for the phone and for corporate IT departments to create customized applications for their employees to use on the phones. There’s even an alliance of software developers – called the “Open Handset Alliance” – whose chief goal is to encourage such custom developments.

As if this new threat were not enough, Nokia, the king of the mobile consumer market, announced its Nokia Tube (5800). Research in Motion is adding to its Blackberry lineup with a newly launched iPhone competitor called Bold. And Samsung Electronics Ltd. is coming out with its entrant, Instinct, a touch-screen phone with some features that are not available in the iPhone, like streaming TV.

And even Garmin Ltd. (Nasdaq: GRMN), the ruler of the GPS device world – and the topic of a recent, well-read “Buy, Sell or Hold” feature here in Money Morning, has launched its nüvifone, that, unlike the iPhone, gives you turn-by-turn directions.

My conclusion is that Apple’s iPhone business will continue its strong growth, but that the growth won’t be as strong as Wall Street recently projected. There will be market growth concerns in the near future, and with rivals ganging up on the successful iPhone, some of the market-share-gain momentum that we’ve recently seen will be blunted a bit in the future, although Apple will keep gaining absolute market share.

What about their computers?  Enjoying the synergistic “halo effect” from its iPod, iPhone and iTunes strategy, Apple keeps gaining market share in the computer market. Another Apple hit was its adoption of Intel chips that can run the Mac OS X, Leopard, and Windows Vista operating systems in the same machine, even simultaneously, with virtualization software.

I am encouraged by these machines, but not exuberantly so. Apple now faces very serious price competition from Windows-only systems.  But on the other hand, the segmentation of the market is critical and the ease of use, maintenance, fast recovery from hibernation, advantage in graphic-intensive tasks, intuitive use and virus-free environment make a Mac irresistible for its traditional constituents, provided they will keep paying the very steep Mac premium pricing.

The conclusion is that, moving forward, with 41% of sales coming from abroad and very small absolute market shares in its key iPhone and Mac businesses, Apple is very likely to be able to continue to gain market share, albeit at lesser pace. Also, given its consumer-centric focus, as the consumer gets hit in developed countries, sales growth will wither, while growth in emerging markets actually can accelerate.

Apple is not a pure computer company any longer, but is instead a consumer products company – and one that possesses a very cohesive strategy. That’s what will allow it to continue to survive and thrive.

The stock – with a PEG ratio of less than 1.0, is a bargain right here. But in the highly volatile environment, wait for weakness to start accumulating it, and take your time.  Apple’s results are much less dependent on the iPod today, and thus the soon-to-be revealed disappointing Christmas season is nowhere as important as it used to be.  So I would buy two-thirds of my position prior to year-end and the remaining third over the subsequent three months in the first quarter, as the bad news over the economy keep trickling in.

ACTION TO TAKE: BUY Apple Inc. (Nasdaq: AAPL), but do so with some care. Purchase two-thirds of your position between now and year-end, and the final third during the first quarter of the New Year.

Source: Buy, Sell or Hold: Apple Inc.

Consumer confidence on the other hand, is getting drastically worse. The anticipated reading of 54 would be the third-lowest reading of the year, and a 10 percent drop from last month. The expected drop this month would reverse the recent trend of increased readings. We still wouldn’t be near our lowest reading of the year which occurred in June (50.4), but looking back over the last 12 months, it is quite startling to see that the October 2007 reading was 95.6.

The advanced GDP figure for Q3 is announced Thursday, and it looks like we will be seeing a contraction compared to last quarter. This advanced reading is likely to show a 0.10 percent decline, but with all the revisions it goes through before we get the final GDP number, I would expect it to become a larger decline by the time the final number is announced down the road.

The Personal Spending report for September comes out on Friday, and just in time for a frightful Halloween, we are expected to show a negative number. Without consumers opening up the wallets and spending money, I don’t see how we are going to pull out of this market. Perhaps a second round of economic stimulus checks will prop up this number in the next few months if the plan comes to pass. If not, outside of a Christmas miracle, this number could get much worse before it gets better.

The big event of the week is the FOMC Policy Statement on Wednesday. Depending on what the Fed decides to do, it could either provide a short-term bounce for the market, or send it tumbling further down to re-test the lows of 2002-2003.  Probabilities are all over the board with cuts from 25 basis points to 75 basis points looking like a very real possibility.

Earnings Calendar:
Monday: VZ
Tuesday: CEPH
Wednesday: GRMN, KFT, PG
Thursday: XOM, JAVA
Friday: CVX

Source: Halloween Isn’t The Only Scary Thing This Week

Money Map Report editor Horacio Marquez says Garmin is an attractive buy at its current price of $34.46. The company is aggressively improving product technology and extending the services it offers to customers. It should also receive a boost from Christmas shopping.

Horacio says Garmin’s high-growth potential combined with its value share price is too much of a bargain to ignore…

This from Money Morning:

Garmin, a leading producer of global-positioning systems, has a strong market position, meaning its stock should deliver nice profits if purchased at the current low valuation.

Global-positioning system technology has revolutionized navigation at sea, in the air, and on land. And with my Garmin unit, you know exactly where you are at sea or on land. By watching your progress as it’s tracked on the GPS map display, you always know your location.

Advanced features allow you to follow the fastest, direct and alternative routes around congestion, as you see fit. And the systems take into account historical and increasingly real-time traffic information on land, and also tell you about hotels, gas stations, ATMs and other nearby points of interest.

As GPS sales exploded in recent years, Garmin saw its stock price soar by nearly 500%. But the field has become much more crowded. While Garmin took the early lead and has a market share of more than 50%, rivals are gaining.

Last year, the Amsterdam-based TomTom NV made a splash with its own devices, which permitted the user to enter a destination address by voice – and which featured a lower selling price. This year Garmin has leapfrogged again, this time by rivaling offerings featuring more-accurate and more-versatile voice-recognition capabilities.

Clearly, the technological leapfrogging, like voice-recognition technology and real-time traffic data is creating more market-share volatility, even as market saturation and increased competition is bringing the prices down. To make matters worse, mobile phones – such as the Apple Inc. (Nasdaq:AAPL) iPhone, and others made by such firms as Nokia Corp. (ADR:NOK) - are adding land-navigation capabilities. This has forced Garmin to strike back by entering the mobile phone market. This proposition is easier said than done, since penetrating this ultra-competitive market is extremely difficult and the rivals in the mobile-phone sector are goliaths.

In this environment, predicting a technological winner is difficult. And it is easy to see that profit margins and sales growth rates by manufacturer are going to keep getting compressed by endless competition.

Already we have seen Garmin miss reduced earnings estimates in the last quarter. And Nokia’s $8.1 billion purchase of U.S. digital-mapping king Navteq Corp. (NYSE:NVT) highlights the rising competition. But Garmin isn’t rolling over and will not let its lead go without a fight. It first tried to acquire a digital-mapping company of its own. When that failed – in Garmin’s typical aggressive fashion – it refused to give up and resorted to a well-thought-out Plan B.

Garmin locked up a long-term deal with Navteq – despite the sale. Then it signed up for the mapping firm’s real-time traffic services. And it continues to consider other services to offer customers – hoping to improve both its margins and its overall profitability.

While the long-term situation in electronics is always one of flux and needs to be monitored closely, the reality is that Garmin’s shares have taken a dramatic beating, plunging 73% from their all-time high of $125.68. Garmin shares closed Friday at $34.46, up 82 cents, or 2.44%.

With a current Price/Earnings Ratio of 8.3, a forward P/E of 9.7 and a Price/Earnings to Grow Rate (PEG) ratio of about 0.5 – and with the Christmas shopping season looming – Garmin is now a value stock with strong growth to come.

The current “doomsday-scenario” pricing sets an absurdly low bar for an industry leader to jump over, meaning the stock represents a solid – if not downright attractive – value at these levels.

Now featuring the top voice-recognition technology, and adding other important features and services, Garmin is demonstrating a bare-fisted response to competitive changes has underscored a willingness to defense its market leadership. Buy this high-tech growth stock at a value-stock valuation.

Action to Take: Buy Garmin for its GPS-market leadership. At current levels, you’re buying a high-growth stock at low-growth, value-stock valuations. It’s too much of a bargain to ignore.

Source: Buy, Sell or Hold: Garmin Ltd.

• Crude oil for September delivery gained $4.58 yesterday (Wednesday) to close at $126.77 a barrel on the New York Mercantile Exchange, MarketWatch reported, after the Energy Information Administration announced crude supplies fell 100,000 barrels to 295.2 million barrels for the week ended July 25.

• Comcast Corp. (CMCSA), the largest U.S. cable television provider, announced yesterday (Wednesday) that net profit in the second quarter rose to $632 million, or 21 cents a share, from $588 million, or 19 cents a share, in the prior year, Reuters reported. Comcast stock gained 89 cents, a 4.64% increase, to close at $20.07 on the news.

• Navigation system maker Garmin Ltd. (GRMN) lowed its full-year outlook to $4.13 per share from an earlier estimate of $4.40 per share in light of the weakening U.S. economic conditions, Forbes reported. Yesterday (Wednesday), the firm missed earnings expectations for the quarter ended June 28, causing shares to plunge over 20%.

• UAL Corp. (UAUA), parent of United Air Lines Inc., filed suit yesterday (Wednesday) against the Air Line Pilots Association union, The Wall Street Journal reported. UAL is seeking an injunction against an unlawful sickout, which caused United to cancel an abnormal number of flights.

• Private employers added 9,000 jobs in July, a private report by ADP Employer Services said yesterday (Wednesday). In June, the private sector slashed 77,000, according to revised data. June was originally reported as 79,000 jobs lost.

• Nisssan Motor Co. Ltd. (ADR: NSANY) said yesterday (Wednesday) that it plans to offer buyouts to about 6,000 workers at its two Tennessee plants and eliminate a night shift at one of them, Reuters reported. Citing lower demand for pickup trucks and sport utility vehicles the company said it would offer technicians and salaried employees a lump sum of $100,000 or $125,000, depending on tenure, as well as medical and car purchase benefits.

• ArcelorMittal (ADR: MT) had a second-quarter surge in earnings, as high steel prices offset soaring mineral costs. Net income rose to $5.84 billion from $2.72 billion a year earlier. Revenue was $37.84 billion, from $27.2 billion a year earlier.

• Nintendo Co. Ltd.’s (OTC ADR: NTDOY) quarterly profit rose 31.5% on the runaway success of its Wii game console. The Wii outsold Sony Corp.’s (SNE) PlayStation 3 and Microsoft Corp.’s (MSFT) Xbox 360, putting Nintendo in the leading position in the three-way game console battle, Reuters reported. April-June net profit rose 33.7% to $1 billion (¥107.27 billion) on sales of $3.9 billion (¥423.38 billion), up 24.4%.

Source: Global Investing Roundups Thursday, July 31st, 2008