Is This Little Known Stock The Next Garmin?

| June 18, 2012 | 0 Comments

During the first decade of the 2000s, no name was more synonymous with navigation than Garmin (GRMN).  The company’s global positioning system (GPS) navigators were the favorite navigation device for millions of drivers everywhere.

And nobody knew that better than the company’s shareholders.  From the IPO to its peak in 2007, the stock provided a nearly 9-fold return.

Not too shabby…

Garmin was created in Taiwan in the early 1990s by two electrical engineers, Gary Burrell and Dr. Min Kao.  The two founders had worked together at Kansas-based King Radio Corporation, a maker of radios and aircraft navigation equipment.

Burrell is credited with designing the first combination navigation/communications radio while working at King.  However, the revolutionary device was geared for general aviation.

Garmin launched its first product, the GPS 100AVD in January 1991.  It targeted boaters and pilots of small planes and sold for about $1,000 apiece.  A year later, the GPS device market had grown into a $100 million industry.

But Garmin was just getting started…

In the late 1990s, Garmin began focusing on the massive automotive market.  The company released two hand-held GPS units, putting paper maps on the road to obsoleteness.

The GPS III included a map of major roads in the Americas and displayed the position of the driver as well as the intended destination on the map.  This unit was not quite as expensive as the GPS for pilots, but it was unable to become a mass-market favorite with a price of $700.

Nevertheless, Garmin continued to grow and grow…

In 2000, revenues surged by 50% to over $345 million.  And the company boasted profit margins that were north of 30%.

Also that year, the company offered shares to the public through one of the hottest IPOs following the dot-com bust.  The company raised $147 million, and the stock soared 42% on its first day of trading.

Garmin used the proceeds to fund a vigorous research and development program.  In 2001, the company launched two dozen new products.  And by 2002, Garmin had secured more than 50% of the GPS market.

However, the company began really hitting its stride in 2003…

That’s the year Garmin released its first GPS devices geared for the masses.

The iQue 3600 combined a handheld personal digital assistant (PDA) with GPS technology and sold for less than $600.  The most popular feature of the device was its “voice guidance” system.  This amazing technology provided spoken directions as the user was driving their vehicle.

From 2003 to 2007, the company continued to launch new and improved versions of their GPS navigators.  As features improved and pricing fell, the company’s revenues and earnings exploded.

And the company’s share price soared…

At its peak in October 2007, GRMN traded for an eye-popping $125 per share.  And the stock had gained more than 790% from its IPO price.

However, that year proved to be the company’s zenith.

Earnings peaked at $3.80 per share in 2007.  And revenues topped out a year later at $3.5 billion.

What happened?

In 2007, the first smartphones began hitting the market.  Once consumers figured out their iPhone could provide navigation services, they stopped buying Garmin’s GPS products.

And now that Apple has gained the upper hand on GPS navigation, they’re not about to let go.  Last week, the company announced it will use TomTom’s GPS technology to provide navigation services on devices running their new operating system, iOS 6.

But here’s the key…

Neither Apple nor TomTom have a map data/service license in their growth market of the future… China.  This means Apple will have to find a local partner to help provide map and navigation services.

No question about it, this is a huge growth opportunity for some lucky company. 

You see, the latest tally puts the number of mobile phone users in China at over 1 billion!  What’s more, China is on pace to overtake the US as the world’s largest smartphone market by the end of this year.

So, which company has the inside track for this potentially game-breaking partnership?

I wish I could tell you, but that wouldn’t be fair to my China Stock Insider subscribers.  You see, this exciting stock is already a holding in our portfolio.  However, with a quarterly subscription that costs less than your daily Starbuck’s, you too can climb aboard this stock before it skyrockets!

Of course, your subscription also includes every stock recommendation and every position update we’ve ever published.  And you’ll receive all future recommendations and updates for as long as you maintain your subscription.  Click here for all the details.

Profitably Yours,

Robert Morris

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Category: Foreign Markets

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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