MKM Partners Upgrades Garmin (GRMN) To Buy

MKM Partners analysts Pablo A. Perez-Fernandez and Tero Kuittinen upgraded their rating for shares of Garmin Ltd GRMN to Buy and raised the price target to $40, up from the previous price target of $36 per share. The analysts said that the main drivers to their upgrade and price target of Garmin Ltd shares were better than expected fiscal 2nd to 4th quarter 2010 PND sales and better than expected non-PND performance in the 1st quarter of 2010. The MKM Partners analysts wrote, "we value Garmin using a sum-of-the-parts methodology because of the company’s composition as a conglomerate of distinct entities. We believe the PND division deserves a multiple far below the market’s, given its lack of growth and declining operating margins. We believe the other businesses deserve a market multiple of 15.5x, given their higher growth and profitability profiles. These valuations yield a fair value estimate of $40, or 13.2x our 2010 pro-forma EPS forecast of $3.03. The following exhibit summarizes our valuation methodology and its sensitivity to a range of P/E ratios for each business segment."