Built Like a Tank, Valued Like a Toaster

Garmin

Garmin was founded in 1989, to build a GPS that worked where the rest failed, across oceans, in the sky, and in the most gnarly environments on Earth. Since its founding, Garmin has evolved into a vertically integrated technology platform operating in five distinct segments: fitness, outdoor, aviation, marine, and automotive OEMs. Unlike your average hardware company, Garmin designs its software, builds its silicon, controls its manufacturing, and distributes its products. Garmin sells smartwatches, dive computers, avionic systems, sonar platforms, and automotive systems that are trusted by BMW, Benz, and Toyota. Garmin doesn’t chase trends, it ships products and builds infrastructure. 

2024 was an excellent year for the Garmin crew, the company reported $6.3 billion in revi up 20% YoY. Every Garmin segment saw an increase in revenue, them dawgs are firing on all cylinders. Its operating income also saw a major jump, surging to $1.59 billion and its operating margins expanded to 25%. This was due to the company scaling efficiently and control of its entire supply chain, enabling them to control all costs. Garmin’s long term strategy is to control its entire supply chain and use cross-segment diversification to reduce risks. Garmin isn’t your grandad consumer brand, they are a multi-industry operator building technology that people trust with their lives. 

We/dem/boys believe that Garmin is undervalued, as many folks often toss them in the same bucket as consumer hardware companies. When in the real world it operates like an embedded systems platform with some gnarly software like margins and industrial-grade resilience. Garmin is divided across five segments, all with different product cycles, customer bases, and risk profiles with no segment accounting for more than 40% of its revi. Garmin's automotive segment is reaching an inflection point with its revenue scaling, improving margins, and long-term contracts with premium automakers. Garmin doesn’t rent, it owns its very valuable supply chain. As Jett once said, “I don’t shop, I buy.”

Azar Capital Group believes that companies with excellent supply chains are excellent long term investments. Garmin has built a resilient, capital efficient, effectively scaled business yet they are valued like a mid-tier consumer electronics shyzaco. We plan on reframing the story around Garmin as a multi-industry hound, not a product seller. Also, its outdoor and fitness segments are no longer consumer plays, they are high-margin bits with strong ecosystems that the market has yet to price in. Garmins vertically integrated model and supply chain gives it a level of cost control that competitors can’t touch. 

In 2024, Garmin made some moves with its revenue up 20% YoY with all of its segments boasting double-digit revenue jumps. Its OEM segment saw a 44% growth, fitness saw 32% growth, Outdoor saw 16% growth, and Aviation and marine segments delivered steady growth as well. The company’s net income came out to $1.44 billion, delivering a GAAP EPS of $7.30 and a pro former EPS of $7.39, up 32% YoY. Every segment was profitable except its OEM segment, its outdoor and fitness segments generated a majority of the company’s revenue. Its aviation and marine segments saw strong growth as well. Auto OEM remains Garmin's only dud currently, but its losses are narrowing from a $61 million loss to $39 million in 2024. This validates Garmin's strategy of leveraging high-design wins with long-term contracts that will lead to profitability. With gross margins of 58%, operating margins at 25%, and net margins of 23%, Garmin operates at a level that rivals SaaS companies. 

Despite its strong financials, Garmin trades at a notable discount related to its industry peers. As of most recent, Garmin’s PE ratio is around 20x which is below its peers with inferior fundamentals and lower capital efficiency. Its EV/EBITDA ratio and price-to-book ratio are both modest, considering its IP, proprietary platforms, and multi-industry reach. Garmin’s valuation doesn’t reflect its dual identity as a customer-facing brand with industrial-grade systems, recurring revenues, and high barriers of entry in key vertices. Garmin currently has zero debt and $3.7 billion in cash, which will allow it to continue to invest in underperforming segments. 

Garmin generates dollars, in 2024, the company reported $1.45 billion in operating cash flow and $1.24 billion in free cash flow which translates to a 19% free cash flow margin. Garmin has been generating strong free cash flow of over $1 billion for the past three years, signaling both operational maturity and long term reinvestment capacity without external financing. In 2024, Garmin returned $572 million to shareholders via dividends and repurchased $62 million in stock buybacks. They also raised its dividend by 20%, a clear signal that the mgmt team is bullish on its long-term cash flows. Garmin is in control, its ability to fund its platforms and scale its ecosystems without touching its balance sheet creates a compounding machine that the market has yet to recognize. 

Garmin operates in a unique lane in all the segments it operates in, they don't chase mass market dominance but focus on high margin, high barrier niches, and builds full stack ecosystems within them. Garmin is not the largest player in any of its segments, but it is the most defensible operator in all of them. In wearables, Garmin doesn’t compete with Apple or Samsung directly instead it dominates the high-performance users. Garmin offers an end to end electronics suite from sonar and radar to touchscreen controls and marine mapping. Its Auto OEM is its newest segment but is growing fast, with Garmin now supplying embedded tech to BMW, Toyota, and Mercedes Benz. Garmin’s cross industry reach is a strategic advantage that few companies can replicate. Garmin’s diverse product selection makes them resilient to industry-specific downturns, and harder to disrupt than any of its competitors. 

Garmin’s growth isn’t driven by one product, it's driven by category-specific product systems that add tremendous value to high-performance users. In Fitness, its flagship products like Forerunner, Fenix, and Epix dominate endurance, lifestyle, and tactical use cases. Its outdoor products have no real competition, this segment is driven by real utility and survival grade tools that are used by mountaineers, off-grid explorers, and professional operators. Its aviation segment includes integrated flight decks, Autonomi auto-land, Smart Glide, and ADS-B systems that are used in private and business aviation. Collectively, Garmin’s product strategy isn’t about unit volume but about building essential platforms that customers can’t easily switch from. 

Garmin has competitors coming out of the wazzu as they operate in several segments, but Garmin wins by going deep where others go broad. In Fitness and wearables, Garmin competes with Apple, Samsung, and Fitbit. In Aviation, Garmin’s primary competitors are defense-tier operators like Collins Aerospace, Honeywell, and Thales. In Marine, competitors include Raymarine, Furuno, and Brunswick/Navico. Its Automotive competitors include Bosch, Continental, Aptive, and Harman. Garmin is rarely the largest operator in any space but is often the one with the highest switching costs and deepest stack control. Also, many companies choose Garmin because it is vertically integrated, lean, and builds faster than its competition. 

Garmin's competitive advantages are built on four key pillars that are its vertical integration, multi-segment diversification, embedded ecosystems, and regulatory entrenchment. Garmin designs its chipsets and operating systems, manufactures in-house, controls its distribution, and runs its software platforms. This gives them massive control of their supply chain, allowing them to be resilient during market downturns. Each of its vertices acts as a hedge against others, when one segment slows another may continue to perform because these segments have different customers, cycles, and price elasticities. Products like Garmin Connect, inReach, and FltPlan, not only drive recurring revenue but also reinforce product lock-in.  For some of Garmins products the switching costs are not just economic related they’re legal, operational, and infrastructural. Once embedded, Garmin becomes the operating layer for entire platforms. 

Garmin operates within five high value vertices, each of which has its distinct structure, growth trajectory, and strategic significance with minimal overlap. Wearable technology and connected fitness is a growing segment but is still split between generalist consumer smartwatches and performance wearables. Outdoor navigation and satellite communication is also a growing niche, fueled by off grid adventuring, disaster response, defense applications, and wilderness safety. Aviation Avionics is a high margin, high certification vertical that is dominated by few players. Growth in this segment stems from the rising demand for pilot assist systems, ADS-B mandates, and emerging electric aircraft platforms that require software-centric flight decks.  Marine electronics are also a steady growth industry with key segments including boating, sport fishing, and luxury marine. Automotive Embedded Systems is one of the fastest evolving vertices, driven by the transition to digital cockpits, electrification, domain controller consolidation, and software-defined vehicles.

Several macro forces push growth across Garmin’s addressable markets including technological advancements in sensors, demographic shifts that are transforming customer bases, regulatory pressures, and geopolitical instability. The aging population in the West has driven massive growth in health-focused wearables and aviation demand while the younger generations are driving outdoor gear growth through adventure travel and remote work. No longer is demand connected to elite users, as broader demographics are moving into use cases that once only served niche pros. In aviation, ADS-B mandates and autopilot redundancy standards are forcing hardware and software upgrades. Marine systems also must comply with safety communication and environmental tracking laws. This creates compliance-driven refresh cycles that provide recurring tailwinds. Garmin’s verticals benefit from an uncertain world that has become more mobile and dependent on systems that don’t / won’t fail. 

The entire industry is being redrawn by convergence, digitization, and autonomy. In Wearables, devices are becoming health platforms, integrating with third party fitness data providers, and medical, and wellness ecosystems. In Aviation and marine, software-defined control systems and AI-driven decision support are transitioning from military to civilian use. While the automotive domain is shrinking into centralized compute units and the winners will be the suppliers who control the software UX layer not just the hardware. Satellite communication is also undergoing massive changes with LEO satellite networks like Iridium Certus and Starlink. Across all sectors, the next leap is interoperability, automation, and edge intelligence. 

Consumer expectations have shifted from function to intelligence, devices must not only work they must know the user. In Fitness wearables, users have begun to care less about step counters and shifted towards performance optimization, health diagnostics, and adaptive coaching. Sustainability is also playing a rising role, as customers seek durable, repairable, and upgradeable devices. Younger demographics are also rejecting overconsumption in favor of multi-year and high-trust tools. There has also been a psychographic shift post covid toward autonomy, mobility, and digital independence. This shift has driven demand for offline capable GPS, long battery wearables, aviation safety tools, and satellite messaging. 

The total addressable market across Garmin’s verticals is expanding rapidly and is largely underpenetrated. The wearables and fitness tech TAM is expected to grow to $90 billion by 2028 with premium and specialized segments outpacing generalized growth. The aviation avionics and flight technology has a TAM of $30 billion driven by business jet, general aviation, and electric aircraft refresh cycles. Marine electronics is also a rapidly growing segment with boating adoption, sonar integration, and aftermarket systems. The Auto OEM cockpit platforms TAM is massive, $100 billion globally across infotainment, domain controllers, and HUDs, with accelerated growth from EVs and software-defined architecture. Satellite communication devices are in their early stages but are forecasted to see massive growth due to Starlink. Garmin’s market isn’t shrinking, it's rapidly expanding and they are well positioned to serve at the high-value end of each segment. 

Garmin’s growth engine is mostly powered by organic growth by new product innovation, expansion with ecosystems, and precision targeting of customer segments with high value use cases. Segments like fitness and outdoor are scaling from product mix upgrades as they shift away from basic GPS to premium multisport watches and advanced satellite communication platforms. Garmin is pushing deeper into AI-assisted features across wearables, satellite-enabled communication, and real-time performance optimization. Garmin is also leveraging proprietary platforms like Garmin Connect, inReach, and Connect IQ to build software stickiness into its hardware base. Garmin also expanded its geographical reach, with revenue in EMEA growing 31% in 2024. Garmin’s growth is driven through product engineering, IP leverage, and controlled channel deployment. 

While Garmin has historically relied on organic growth methods they are no noob to executing high-impact M&A deals. In 2016, dem boys acquired DeLorme, which brought inReach satellite communication technology into Garmin’s outdoor and marine platforms. Then in 2019, Garmin acquired Tacx, an indoor cycling training firm that the crew integrated into its performance fitness portfolio giving them full control of the cycling customer from outdoor GPS to indoor power training. Most recently in 2023, they acquired JL Audio, a high end marine and vehicle auto systems company that boosts its margins revenue by over 10% in 2024. Expanding its domain into full sensory integration with sound, vision, and navigation. Garmin doesn’t acquire companies to artificially boost its revenue, it acquires them for platform fit and control. They have made strategic partnerships with Auto OEMs like BMW, Toyota, and Benz intending to become a part of their product's DNA. 

The clearest short-term catalyst for Garmin is its Auto OEM segment is making it profitable, in 2024 the team grinded hard and cut down operating losses by $22 million. This segment could add over $1 billion in revenue over the next few years if penetration into next-gen automotive platform accelerates. Garmin’s aviation segment is also poised for a platform fresh, with its R&D investment surging in 2024. Global connectivity and satellite infrastructure are finally catching up to Garmin’s early positioning. Lastly, Garmin’s GOAT’d supply chain is another catalyst with its in house manufacturing capabilities giving them advantages and margin protection that few consumer-facing companies can match. The lads also increased Capex guidance in 2025, signaling reinvestment into capacity, IT infrastructure, and platform readiness. The boys are preparing for battle. 

Garmin’s vertically integrated model is one of its biggest strengths but it also introduced risks related to manufacturing, software-defined systems, R&D execution, and executing across all of its verticals. With its major manufacturing operations centered in Taiwan and China, the company is exposed to geopolitical instability. Garmin’s brand is also built on trust and reliability, any failures in aviation or marine could trigger long-term damage that outweighs that typical consumer tech error. Managing innovation cycles, production priorities, and go-to-market strategies across a board portfolio is also hard as fuck. Any breakdown in allocation, prioritization, or talent retention could slow product cycles and compromise quality. 

Garmin operates in highly specialized and regulation-heavy industries that create compliance risks and policy sensitivity, especially in aviation, auto, and marine. Any shift in regulation could delay product launches, invalidate its legacy systems, or force redesigns. Competition is another pressure point, particularly from non-traditional players with lots of capital to deploy. Apple and Samsung have the coin to absorb losses in wearables while expanding its feature set. If larger players begin targeting Garmin’s niche segments with pricing battles or bundle systems the company’s margins could come under fire. A downturn in discretionary spending or a consumer rotation away from outdoor activity could hurt revenue. 

Garmin trades at a valuation that reflects its legacy hardware identity, while this creates upside it also creates narrative risk. Investors anchored to traditional consumer electronic multiples may undervalue Garmin’s moat in aviation and marine segments or dismiss its auto OEM potential. The company's EPS growth has been strong, but pro forma adjustments around tax rate normalization could introduce variability. Also, while free cash flow remains strong aggressive capex or inventory build-up could reduce FCF in the short term. Garmin has resisted taking on debt but that could limit expansion in bull markets where leveraged capital is rewarded. 

Garmin kills it across five distinct and synergistic industries, they combine customer-facing brand loyalty with industrial-grade systems. In 2024, Garmin developed strong 20% revenue growth with its outdoor and fitness segments becoming margin machines. Garmin isn’t chasing growth but its earning it with control, ecosystem depth, and a diversified revenue structure. Garmin is well positioned to defend its share and take out the competition. 

The bad boys over at Azar Capital Group will be giving Garmin a ‘BUY’ rating. We believe that Garmin is underappreciated with its valuation sitting around 20x earnings, well below its peers with inferior cash conversion and lower returns on invested capital. Major upside will be unlocked when its auto segment turns profitable and its aviation segment monetizes its next-generation flight platforms. With a solid balance sheet, global reach, and high switching costs, Garmin is ready to make moves. Garmin is a long-term compounder that has been mispriced by phonies.

Disclosure

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