NEW BEARISH Plays
Garmin Ltd. - GRMN - close: 50.75 change: -0.78
Stop Loss: 52.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 23, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.1 million
New Positions: Yes, see below
Why We Like It:
Garmin was founded in 1990. They became a big name in the navigation technology business. I'm sure many of us remember buying GRMN automobile PNDs (portable navigation device) that sat on the dashboard or stuck to the windshield. Yet those have been replaced by the ubiquitous smartphone and in-dashboard GPS systems.
GRMN still sales a lot of auto GPS systems, many to OEM clients. They also sell fleet management solutions. GRMN has also see some growth in their systems for aviation (planes) and marine (boats). They seem most excited about getting into the wearables industry with a focus on fitness devices. Although that is going to be a crowded market soon.
Officially the company describes itself as, "Garmin International Inc. is a subsidiary of Garmin Ltd. (GRMN), the global leader in satellite navigation. Since 1989, this group of companies has designed, manufactured, marketed and sold navigation, communication and information devices and applications â€“ most of which are enabled by GPS technology. Garminâ€™s products serve automotive, mobile, wireless, outdoor recreation, marine, aviation, and OEM applications. Garmin Ltd. is incorporated in Switzerland, and its principal subsidiaries are located in the United States, Taiwan and the United Kingdom."
It's a bit surprising to see GRMN's relative weakness considering their last earnings report back on July 30th. The company has no debt and their last results beat estimates. Management raised their 2014 guidance. Gross margins improved from 55% to 57% and operating margins improved from 24% to 28%. Unfortunately traders sold the news.
You can see the big spike on its earnings report and immediate reversal lower. Since then traders have been selling the rallies. Now GRMN is under its 200-dma and it looks poised to breakdown under support near the $50.00 mark.
We suspect this trend down continues. Tonight we're suggesting a trigger to launch bearish positions at $49.75. I'm not setting an exit target tonight but the point & figure chart is forecasting at $42 target.
NOTE: GRMN does have an elevated amount of short interest (more than 10% of the float). Traders may want to use the options to limit their risk.
Trigger @ $49.75
- Suggested Positions -
Short GRMN stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the 2015 Jan $50 PUT (GRMN150117P50) current ask $3.10
Option Format: symbol-year-month-day-call-strike