Garmin(NYSE: GRMN) has quietly emerged as one of the hottest growth stocks in the technology sector. At the time of this writing, shares of the electronic devices giant are up 63% year to date with its rally gaining momentum following the company's latest quarterly update.
Long-time shareholders have plenty to cheer about, while investors sitting on the sidelines may wonder if Garmin can keep its winning streak going into 2025. Let's discuss where Garmin stock might be one year from now.
Fantastic growth momentum
With a history spanning more than 35 years, Garmin is recognized as a leader in integrating global positioning system (GPS) technology across an innovative portfolio of consumer devices and commercial products.
Originally focused on building specialized aircraft cockpit instrumentation, the company has found global success by expanding into areas like car and marine navigation systems while pioneering the category of GPS-enabled wearables for health and fitness tracking.
Maybe the biggest development for Garmin in recent years has been the major automobile manufacturers' move to increasingly incorporate high-tech infotainment systems offering not only navigation but also driver monitoring and even augmented reality heads-up displays. Customers like BMW, Honda, Ford, and Toyota have propelled the demand for Garmin's in-cabin domain controllers and automotive original equipment manufacturer (OEM) solutions.
Image source: Getty Images.
The growth trends have been impressive. In the fiscal third quarter (for the period ended Sept. 28), Garmin posted a net sales increase of 24% year over year, while its $1.99 in adjusted earnings per share (EPS) climbed 41%. Notably, both headline metrics came in well above the average of Wall Street estimates, and they even accelerated sequentially from the previous quarter.
Garmin achieved record revenue in all five of its reporting segments with a 53% increase in auto OEM sales leading the growth. The fitness products group has also performed well, up 31% thanks to the launch of several new wearable devices. Garmin's 2023 acquisition of JL Audio continues to boost results for the company's marine segment while marking an entry into new categories like high-end audio systems.
The company's shift into more premium and specialized technology has translated into a rising gross margin too, which reached 60% in Q3 compared to 57% last year.
Management's confidence in its outlook was evident in its new full-year guidance. For 2024, Garmin now expects annual revenue growth of 17% compared to a prior estimate of 14%. The company is also targeting EPS of $6.85 this year, up from the $6.00 forecast issued last quarter, representing a 23% increase from 2023.
| Metrics | 2023 | Prior 2024 Estimate | New 2024 Estimate |
| Revenue | $5.23 billion | $5.95 billion | $6.12 billion |
| YOY (change) | 8% | 14% | 17% |
| EPS | $5.59 | $6.00 | $6.85 |
| YOY (change) | 9% | 7% | 23% |
Data source: Garmin. YOY = year over year.
Room to stay bullish
Garmin's financial strength stands out as an outlier considering its exposure to weaker industry themes including sluggish new car sales globally and ongoing headwinds facing consumer spending. This ability to execute across a challenging market environment says a lot about the company's appeal as an investment.
Heading into 2025, there is some optimism the macroeconomic environment will get a boost from recent interest rate cuts by the Federal Reserve, fueling a new round of growth momentum. The bull case for the stock is the company will keep outperforming expectations as it consolidates market share.
Given Garmin's unique operating profile, the company doesn't have a directly comparable competitor. That being said, I believe the stock trading at 30 times its forward earnings estimate compares well to tech giant Apple, which is currently priced at a similar earnings multiple.
In this case, both companies operate in consumer electronics with a large presence in wearables. While Apple has moved more toward software, Garmin is generating stronger growth with its diverse hardware lineup. Ultimately, Garmin's leadership across multiple product segments as well as its earnings trajectory can support an even higher valuation premium.
Data by YCharts.
My prediction for Garmin stock
Garmin has surprised many stock market observers this year. While the company's strong outperformance in 2024 will be hard to top, Garmin stock has the right ingredients to be trading even higher by this time next year. As long as Garmin remains resilient in these macroeconomic conditions, solid fundamentals can continue rewarding its investors over the long run.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Garmin. The Motley Fool recommends Bayerische Motoren Werke Aktiengesellschaft. The Motley Fool has a disclosure policy.
