Garmin Stock Breaks Out on Strong Earnings and Outlook

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Garmin Ltd. (GRMN) shares rose more than 6% during Wednesday’s session after the company reported better-than-expected fourth quarter financial results. Revenue rose 18% to $1.1 billion, beating consensus estimates by $90 million, and non-GAAP net income reached $1.29 per share for the quarter, beating consensus estimates by 24 cents.

Looking ahead, the company anticipates full-year 2020 revenue of $4 billion, ahead of consensus estimates calling for $3.78 billion, and pro forma earnings per share of $4.60, beating consensus estimates calling for $4.07. Management also expects gross margins to reach 59.2%, compared to 58% during the fourth quarter, and operating margins of 23.5%. Garmin also increased its quarterly dividend to 61 cents per share, which represents a 7% dividend yield, citing the strong financial results and outlook.

In January, Credit Suisse upgraded Garmin stock from Underperform to Neutral with a $100 price target. Analyst Robert Spingarn believes that headwinds from ADS-B sales in the aviation business were less severe than expected. A bottoming in auto segment sales and strength into other segments could help Garmin retain a mid-single-digit growth rate in 2020.

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From a technical standpoint, the stock broke out from prior reaction highs to fresh 52-week highs. The relative strength index (RSI) moved toward overbought territory with a reading of 65.81, but the moving average convergence divergence (MACD) could have seen a bullish crossover. These indicators suggest that the stock could have room to run before consolidation.

Traders should watch for some consolidation above reaction highs of about $102.00 following the indecisive spinning top candlestick pattern. If the stock breaks down from these levels, traders could see a move toward the 50-day moving average at $98.17. The more likely scenario is that the stock rebounds toward fresh highs after some consolidation.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

Source: Investopedia

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