Garmin Good, Blockbuster Not So Much
This Garmin (GRMN) earnings reports was quite fantastic. According to Associated Press, net income grew 60 percent to $139.9 million, or 64 cents per share. The only negative thing here – the cheaper dollar inflated their EPS by 5 cents. Revenue increased 52 percent to $322.3 million as sales in the auto/mobile segment more than doubled to $316.6 million. Then why is the stock down? Well, margins are shrinking as prices across all units are being slashed aggressively. Units are now selling for as low as $200. Consequently, the company missed revenue estimates by 1%. However, I liked the fact that demand is so high that Garmin is adding production lines at its Taiwan manufacturing plants and may buy a third plant. I believe the sell off was an over-reaction. Newer products in the forthcoming quarters will boost margins. I believe shares might come in some more and while I would not open a new position unless the stock hits $52, I encourage those who own it to stick with it. Pending any market sell offs, the stock will treat you well.
Meanwhile, Blockbuster’s earnings were quite disappointing. Subscriber growth was strong, but it came at a price. The company has been successful taking market share away from Netflix (NFLX), but might have to end up charging more for the Total Access Program. For short term investors, this is dead money and will require a lot of patience. Longer term investors should take solace in the fact that Carl Icahn is the largest holder of Blockbuster’s stock. Additionally, Blockbuster is making the right moves to get their business in gear. Selling off their European gaming unit is one example of how they are focusing their efforts in the movie business. I also think that they are planning to move into the online movie space aggressively, but are keeping those efforts on the down-low. Long term investors will be rewarded for sticking with this name.
– Faisal Laljee
Full Disclosure: I own GRMN but my position can change anytime without notice. I do not own any BBI.