Garmin Navigates to New Highs Driven By Wearables Trend

Garmin Ltd. (NYSE: GRMN) launched in 1989 with the sole focus of providing GPS devices for consumers. Years later, the advent of smartphone GPS apps like Google Maps, Apple Maps, and Waze could have spelled death for the company. However, the computer and technology sector giant has thrived by branching out to become one of the largest providers of smartwatches and fitness trackers. 

Dedicated GPS

While commuters and consumers are used to using a smartphone navigation app, Garmin users love having a dedicated GPS that doesn’t rely on cellular connectivity. The advantages of having a dedicated GPS include better battery life, more coverage and data privacy. Since it uses satellite tracking and preloaded maps, Garmin GPS devices can be used in the wild where there are no cellular towers. This is why Garmin GPS is often the brand of choice with boaters, pilots, hikers, and fishermen who routinely traverse rural and distant locations.

Flourishing Wearables Business

Garmin has become a favorite among smartwatch users, notably for fitness tracking. Runners, swimmers, cyclists and gym rats love Garmin smartwatches to track calories and measure pulse, resting heart rate, heart rate variability (HRV), stationary time and hourly activity. For women, its purpose-built smartwatches feature menstrual cycle tracking, pregnancy tracking, sleep score, body battery, and stress score tracking. Garmin continues to roll out features and next-gen versions of its smartwatches.

 Daily Bull Flag Breakout

GRMN formed a daily bull flag breakout pattern. The preceding flagpole run-up peaked at $149.50 before the parallel upper and lower trendlines generated a reversion down to $138.86. GRMN shares bounced and broke through the $144.54 upper trendline resistance heading into its Q1 2024 earnings release. The report triggered a gap up to $151, which ground up to a  $166.44 swing high. The daily relative strength index (RSI) surged to the overbought 82-band. Pullback support levels are at $153.33, $144.84, $134.11 and $123.46.

Solid Q1 2024 Results

Garmin crushed Q1 2024 EPS, reporting $1.42 versus $1.01 consensus analyst, a 41-cent beat. Operating income grew 51% YoY to $298 million. Revenues surged 20.4% YoY to $1.38 billion, crushing the $1.25 billion consensus estimates. Gross margins expanded to 58.1% and operating margins to 21.6%. Garmin was named Supplier of the Year by Independent Build Builder Inc.

Segment Growth 

The company hit record first-quarter revenues in four of its segments -- Fitness, Outdoors, Aviation, and Marine -- and also saw an increase in its Auto Origination Equipment Manufacturer (OEM) segment.

The Fitness segment revenues surged 40% YoY to $343 million, driven by the strong demand among athletes for its newly launched Forerunner 165 series. Its Outdoor segment revenues rose 11% YoY to $366 million, resulting in $107 million in operating income. The Aviation segment had a 2% increase in sales driven by growth in OEM products. Its Marine segment revenues rose 17% YoY to $327 million, primarily driven by the acquisition of JL Audio.

Garmin's Auto OEM segment saw a 58% YoY increase to $129 million, driven by increased domain controller shipments to BMW. While the gross margin was 18%, the company recorded a loss of $16 million in the quarter.

Reaffirmed Guidance

Garmin reaffirmed its full-year 2024 guidance of pro forma EPS of $5.40 to $5.44 consensus estimates. Full-year revenues are expected to be around $5.75 billion versus $5.73 billion consensus estimates. The Board recommends a $3.00 dividend paid out in four quarterly payments of 75 cents per share, and the vote will be held at the annual meeting on June 7, 2024.

Upbeat CEO Insights

Garmin CEO Clifton Pemble noted that the positive trends concluding 2023 were strengthened in Q1 2024. Pemble reminded analysts that the first quarter is typically the low point of seasonal sales and, as such, will just reaffirm its prior guidance.

Pemble commented, “ Our products are unique, highly differentiated compared to a lot of products that are on the market. So people look to our products for particular inspiration around activity, but sports wellness, all those things is something that we're known for. So we're definitely seeing people appreciate our products for those things. Registrations have been strong. So we're seeing that follow through at retail, and we still see the majority of our users that are coming in as new users to Garmin as opposed to repeat.”

Garmin analyst forecasts and price targets are on MarketBeat.

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Pinterest Prospers From AI Boosting Shop-Ability and Relevance

Social commerce platform Pinterest Inc. (NYSE: PINS) shares are climbing towards 52-week highs on the heels of a spectacular Q1 2024 earnings report. The rebound in the advertising market, coupled with its artificial intelligence (AI) powered personalization and shop-ability effects, bolstered the company's revenue growth and monthly active users (MAUs). Pinterest has also scaled up its third-party partners, such as Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOGL). 

The resurgence in ad spending has been reflected in the performance of other computer and technology sector companies like Snap Inc. (NYSE: SNAP) and Google.

Revenue Growth Drivers

Pinterest brands itself as a visual search and discovery platform. Users visit the site to get lifestyle, home, fashion, hobby, meal and activity ideas and lists. The platform also provides relevant purchase options.

Pinterest has stated that four drivers can bolster its revenues:

1. Grow users and deepen engagements per user.
2. Increase ad load by driving the synergies between the user's commercial intent and relevant ads.
3. Execute on its lower funnel revenue opportunity.
4. Drive demand through third-party resellers, partners and international markets.

Using AI to Drive Personalization and Relevance

Pinterest has long stated that personalization is a growth driver. The company has aggressively implemented next-gen AI and large language models (LLMs) to improve user experiences. It has also transitioned from CPU to GPU, enabling it to serve 100x size models.

For example, its recommendation models originally focused on delivering content to drive greater viewing times in the immediate moment. With AI implementation, the focus is on user intent, helping to incorporate proprietary signals in its recommendation models to satisfy intent and optimize the depth of engagements. This includes driving more actual outcomes like clicks, conversions and saves and helping users navigate their inspiration-to-action journey.

A Positive Alternative to Traditional Social Media

Pinterest is known as a positive, non-confrontational, non-controversial, unintrusive and non-political platform. As such, it’s quickly becoming a positive alternative to traditional social media. This is evidenced by the accelerating growth of Pinterest's monthly users, most of whom are joining through the mobile app.

Gen Z is Pinterest's fastest-growing demographic, representing 40% of its 518 million global users. Its Gen-Z users rate Pinterest high on promoting and preserving well-being metrics like bellowing, self-worth, and purpose compared to other social media sites. This has resulted in the rare phenomenon of aging down, i.e., bringing younger users to the platform.

Daily Descending Triangle Breakout

PINS formed a descending triangle breakout pattern. The descending triangle commenced at $41.80 on February 6, 2024. Shares sold off to the $33.52 flat-bottom lower trendline. The descending trendline capped the bounce attempts as PINS moved closer to the apex. PINS broke down on April 15, 2024, as shares sank to a new swing low at $30.56 on April 25, 2024. Shares recovered to the flat-bottom trendline level heading into its Q1 2024 earnings release. PINS gapped up to $37.91 following the report and continued to grind up towards its 52-week highs. The daily relative strength index (RSI) bounced and flattened at the 75-band. Pullback support levels are at $37.91, $35.44, $33.52 and $30.56.

Stellar Q1 2024 Performance

Pinterest reported Q1 2024 EPS of 20 cents, beating consensus estimates by 7 cents. GAAP net loss was $25 million, while adjusted EBITDA was $113 million. Revenues surged 22.8% YoY from $740 million to $700.28 million. Its global MAUs rose 12% YoY to 518 million. The majority of growth came from the Rest of the World (ROW). Average revenue per user (ARPU) rose 19% YoY to $6.04 in the United States and Canada. Global ARPU rose 10% YoY to $1.46.

Raised Guidance

Pinterest provided upside Q2 2024 revenue guidance to $835 million to $850 million, representing 18% to 20% YoY growth. Non-GAAP operation expenses are expected in the range of $490 million to $505 million.

AI and Shop-Ability Driving Greater ROI for Advertisers

Pinterest CEO Bill Ready was upbeat about the quarter and how AI investments were paying off. Ready stated, “Thanks to our investments in AI and shop-ability, we’re driving even greater returns for advertisers and gaining access to performance budgets. We’re executing with tremendous clarity and focus, shipping new products and experiences that users want, and in doing so, we’re finding our best product market fit in years.”

Pinterest also completed its rollout of direct links in the first quarter. This reduces friction and improves actionability, taking the user directly to an advertiser's product page. Clicks to advertisers have more than doubled YoY.

Pinterest analyst ratings and price targets are on MarketBeat. 

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AbbVie Tracking for New Highs in 2024

Shares of AbbVie (NYSE: ABBV) fell hard in the wake of its Q1 earnings report, but the dip is over. The market response to slowing Humira sales is overshadowed by strength in the non-Humira portfolio, resilient business, and a solid pipeline. Analysts trimmed their targets following the release, but that statement has a caveat. 

The two analysts' revisions tracked by Marketbeat include lowered price targets, but they are still at the high end of the expected range and project upside for investors. The consensus estimate forecasts a slim 6% increase for the stock, but the high-end adds another 7% to that target and opens the door for much larger gains because it would be a new all-time high for this healthcare stock. 

AbbVie is Positioned for Long-Term Growth 

AbbVie had a solid quarter, highlighted by a return to growth, revenue strength, outperformance on the bottom line, and increased guidance. Together, the news should have moved the market to higher price points, but is offset by the slowdown in Humira. Humira sales fell 40% in the quarter and are expected to continue to slow due to competition from biosimilars. However, that is, in turn, offset by increased sales of key drugs Ubrelvy, Skyrizi, Venclexta, Rinvoq, and Qulipta, which are up 34%, 48%, 48%, 60%, and 98%, respectively. Humira revenues are now less than 20% of the total and will soon be overshadowed by Skyrizi.

Margin is another area of strength supporting the market for this stock. AbbVie’s margin contracted compared to last year but less than expected, including the unfavorable impact of milestone payments. The takeaway is that GAAP earnings of $0.77 are up 500% YOY due to one-offs in the prior year’s results, and the $2.31 in adjusted earnings beat by a nickel and strengths are projected to continue through year-end. 

The guidance is the most favorable aspect of the report and includes an increase in the expected earnings. The company raised its full-year adjusted EPS guidance to a range with the low end above consensus. Because the company is building momentum in the non-Humira portfolio and Humira sales are still solid, guidance may increase later in the year. The pipeline plays into that outlook with several positive developments over the quarter, including the acquisition of ImmunoGen. ImmunoGen’s Elahere for ovarian cancer has been approved for initial treatments and is on track for approval for numerous others. 

AbbVie Capital Returns are as Healthy as Ever 

AbbVie’s capital returns are as healthy as ever. The balance sheet highlights an increase in debt and a reduction in shareholder equity, offset by an increase in cash, up 50%, and the recent acquisition of ImmunoGen, worth more than $10 billion. It is expected to impact results as soon as this year positively and should pay for itself quickly. Elahere sales are expected to grow at a 100%+ CAGR through 2029 to nearly $700 million annually, and the estimates are light given the outlook for approvals for broader usage.

Until then, AbbVie’s dividend payment is about 67% of the Q1 earnings and 57% of the full-year guidance, which is sustainable. The company is expected to return to earnings growth by the end of the year and sustain it in 2025, so dividend increases should also continue. The company also repurchases shares to offset the dilutive effect of share-based compensation and lowered the count by .015% YOY in Q1.  

AbbVie Shows Support at a Critical Level

Shares of AbbVie fell to critical support ahead of the Q1 release, retested that level after it and continue to trade above it now. The market action could be more robust but shows support at this level with average daily volume and may begin to rebound soon. If not, the price action of AbbVie could fall to retest the recent lows and possibly set a new low. The market could fall to $155 or lower before finding solid support in that scenario, but that is not expected. 

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