Garmin Outperforms Despite Tough Compare From 2020 Pandemic Tailwinds; Raising FVE to $143

In its third quarter, Garmin surpassed FactSet consensus for the top and bottom line--a tough feat considering a hard compare with massive pandemic tailwinds seen in 2020 and current elevated supply costs. The outperformance gave Garmin increased confidence in its expected 2021 results, as outlook was raised. While our long-term forecast remains largely unchanged, we have reconsidered Garmin’s cost of equity and now deem its rating to be “below average” instead of its former rating at “average.” As a result, we are increasing the fair value estimate for the narrow-moat company to $143 from $113 per share. Shares are down 7% upon results, near $150 per share--leaving the stock fairly valued, in our view. Overall, we continue to believe that Garmin’s tailwinds from the pandemic will be long lasting and that switching costs, aided by strong brand perception as the industry standard in its markets, will remain strong.