What Do Garmin’s Newly Added Risk Factors Tell Investors?

Garmin (GRMN) is a Swiss multinational that makes a range of navigation, information, and communications devices. Its products are used in aviation, marine, auto, outdoor, and fitness markets.

For Q4 2021, Garmin reported a 3% year-over-year rise in revenue to $1.39 billion, exceeding the consensus estimate of $1.36 billion. It posted EPS of $1.55, which declined from $1.73 in the same quarter the previous year but beat the consensus estimate of $1.37.

For full-year 2022, Garmin anticipates a 10% rise in revenue to $5.5 billion. It expects EPS of $5.90. The company recently acquired marine communication equipment and services provider Vesper Marine. 

Garmin plans to distribute a quarterly cash dividend of $0.67 per share on March 31 and has set March 14 as the ex-dividend date. Offering a yield of 2.34%, Garmin is among the highest yielding stocks in its sector, where the average yield is 0.69%.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Garmin.

Risk Factors 

According to the new TipRanks Risk Factors tool, Garmin’s top risk category is Finance and Corporate, with 9 out of the total 38 risks identified for the stock. Legal and Regulatory and Macro and Political are the next two major risk categories with 8 risks each. Garmin recently updated its profile with five new risk factors. 

The company tells investors that its operations are exposed to IT system failures and network disruptions. It mentions natural disasters, terrorism, and cybersecurity incidents as potential causes of such failures and disruptions. While Garmin has business continuity and recovery plans in place, as well as insurance coverage, the company cautions that such measures may not be sufficient to mitigate the disruptions or cover losses. In the event of system failures or disruptions, the company warns that its business, operating results, financial condition, and reputation may be harmed.

As a company with a global footprint, Garmin informs investors that it is subject to complex regulations. It explains that compliance with all the global regulations may be difficult. It warns that if it is found to be in breach of laws and regulations, its business and reputation could be harmed.

In another newly added risk factor, Garmin cautions that its global operations expose it to fluctuations in foreign exchange rates. The company explains that if foreign currencies weaken relative to the U.S. dollar, it may need to raise its international prices. The problem is that price hikes could reduce the demand for the company’s products. Garmin goes on to caution that if certain foreign currencies strengthen relative to the U.S. dollar, its international expenses could increase and harm its profitability.

Analysts’ Take

Morgan Stanley analyst Erik Woodring recently reiterated a Hold rating on Garmin stock with a price target of $127, which suggests 10.90% upside potential.

Consensus among analysts is a Moderate Buy based on 4 Buys and 2 Holds. The average Garmin price target of $157.33 implies 37.38% upside potential to current levels.

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