Garmin Punished by TomTom Warning, A Week After Garmin’s Own Downward Guidance (GRMN, TRMB, NVT, NOK)

Garmin Ltd. (NASDAQ: GRMN) is in a funk, after being in its own funk less than one week ago.  Just last week it gave comments to Reuters discussing forward guidance that Wall Street rightfully took as a light version of an earnings warning, which was going to be under estimates if the company wasn’t trying to leave itself with a huge amount of leeway so it would be well received.  Garmin’s biggest problem now, besides a market and economy that won’t be good for it, is that its shares just took out 52-week lows again.

Today, TomTom overseas issued its own warning. It noted that retailers had reduced PND devices inventory levels by more than expected.

This just goes to show you that even after a major market drop and recovery that the markets are nowhere close to efficient as of yet.  Garmin already outlined much of this last week.  We noted that Garmin’s woes looked adequately factored in after a 60% drop last week with using some common sense about what people will spend on in 2008, although we also noted that the PND and GPS sector was still going to have problems of its own.  So the market is back to headline-reactionary only: "Industry leader warns, stock drops severely… 1 week later its competitor warns, industry leader’s stock whacked hard again."

We first started seeing signs of a crack in the GPS market back in November, 2007, when we saw Trimble Navigation (NASDAQ: TRMB) issue statements.  Speaking of Trimble, its shares are down mildly by almost 1% at $27.10 today.

Shares of NAVTEQ Corp. (NYSE: NVT) are actually up marginally today and up quite a bit higher than last week, so perhaps the fears are easing about any concerns over Nokia (NYSE: NOK) acquiring it.  That is still under European Union review and could be close to three months before the full answer is known.  NAVTEQ shares are up 1.3% at $66.90, which is more than 6% off of the lows of last week.

A downgrade out of Soleil Securities from this morning certainly isn’t helping after the boutique lowered its Buy rating down to a new Hold rating.  Just keep in mind that this downgrade while the stock is under $50.00 comes after a 60% sell-off after this has been as high as $125.00.  We would caution that stocks that gap under $52-week lows twice tend not to see immediate recoveries, and a stock trading community that can only react to every headline as if it was fresh and developing each day isn’t going to offer much help either.

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Jon C. Ogg
April 8, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at [email protected] and he does not own securities in the companies he covers.