"Though I've long believed Garmin (NASDAQ: GRMN) was easily the best managed firm in the GPS space, it continues to feel the sting from competitive forces," says Paul McWilliams.
Here, the technology stock specialist and editor of Next Inning reviews the company and the prospects for its new entry in the cell phone market -- the nuvifone.
"As you would expect, the nuvifone is very GPS-centric with all sorts of Geo-tagging features for email, SMS and pictures. It also includes an Opera browser and is fully capable of viewing Word, Excel and PowerPoint documents and working with both personal and enterprise email systems.
"While I've not seen one in person yet, what I've heard from those who have and from what I've seen on the GRMN web site, I think the product has potential.
"The key, however, will be how the nuvifone is marketed and how well GRMN does in building an applications store, a factor that I think will be a huge differentiation driver as we move forward in the Smartphone sector.
"With tangible asset value valued at $9.97 per fully diluted share and net current assets accounting for more than half that value ($6.37 per fully diluted share), GRMN has a sound balance sheet as a foundation.
"In addition to this, GRMN also benefits from excellent management that demonstrated during the last quarter that it can rapidly scale its operations and has what I think is a viable potential to open a meaningful position in the handset space during the second half of 2009.
"While I think the $2.97 earnings consensus for 2009 will prove to be at least 15% to 20% too high, with its price in the mid-teens and net cash of $3.51 per fully diluted share, even if GRMN were to report 'only' $2.00, the current price of $16 and change would still be below what I view as any reasonable calculation of fair value.
"But make no mistake, the real speculation here for the short to mid-term is whether the nuvifone builds any traction; if it does the price could easily double during the second half, but if it flops, we could just as easily see GRMN fade to low double digits."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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