Garmin

Garmin enjoys several reinforcing moats. In aviation, certification know-how, installed base, and FAA/EASA approvals create high switching costs and efficient scale in general aviation avionics.

In marine, proprietary charts and sonar (Navionics, LiveScope), tight hardware-software integration, and distribution relationships underpin share and pricing.

In performance wearables, brand equity among serious athletes and multi-year training data in Garmin Connect create moderate switching costs, while long battery life and specialty sensors differentiate against general-purpose smartwatches. Vertical integration from design to manufacturing improves time-to-market and cost control.

Risks: Apple and Samsung pressure the mainstream watch category; subscription policy missteps could erode goodwill; and auto OEM remains a long-ramp program with historically negative margins but improving scale.

Overall we see multiple durable moats with the most resilient in aviation and marine, and a defendable, niche-focused position in wearables. Key data points supporting durability: record 2024 revenue with broad-based segment strength; H1 2025 segment operating leverage; and a very large patent and trademark portfolio disclosed in the 10-K.

Garmin demonstrates pricing power in aviation and marine where safety certifications, workflow integration, and specialized functionality limit commoditization. The premium tiers of Fenix, Epix, Forerunner, Edge, and tactix also show resilience, aided by differentiated battery life and training analytics.

Gross margin expanded to 58.7 percent in 2024 and management guides to 58.5 percent in 2025, signaling maintained mix quality despite macro uncertainty.

Offsetting factors: mainstream wearables remain more price-sensitive, and recent subscription changes (inReach and Connect Plus) sparked user pushback that management must navigate carefully to avoid damaging perceived value. Overall we rate pricing power above average with upside if recurring content mix rises.

Revenue is diversified across five segments with different cycles. Aviation and marine exhibit durable replacement and content revenue (databases, charts, subscriptions), while fitness and outdoor are consumer-driven but supported by sticky ecosystems and accessories.

Management raised 2025 revenue guidance to approximately 7.1 billion dollars following strong H1 trends. Still, consumer wearables introduce volatility and auto OEM ramps can pressure margins until platforms scale. FX and tariff headlines can affect demand and costs.

We view overall growth as steady and increasingly subscription-supported, but not as toll-like as networks or rating agencies.

Financial resilience is outstanding: no financial debt, about 3.9 billion dollars of cash and marketable securities as of June 28, 2025, and strong profitability. 2024 gross margin was 58.7 percent and operating margin 25.3 percent, with 2025 guidance implying continued high-20s operating leverage.

Cash generation is robust: TTM free cash flow is approximately 1.13 billion dollars, derived from SEC filings as FY24 operating cash flow of 1,432.5 million less 2024 capex of 193.6 million, plus H1 2025 free cash flow of about 508.2 million, minus H1 2024 free cash flow of about 620.3 million.

Liquidity more than covers working capital, R&D, and shareholder returns.

Management balances heavy organic reinvestment with disciplined shareholder returns. R&D intensity is high and strategic, supporting moats across avionics, marine, maps, and sensors.

Garmin pays a regular dividend, approved at 3.60 dollars per share for 2025, and maintains a measured buyback approach with a 300 million dollar program authorized through December 2026, 143 million dollars of which remained as of June 28, 2025. Stock-based compensation is present but moderate relative to revenue and cash flow.

M&A has been selective, with prior moves such as JL Audio adding capabilities in marine. We would like repurchases to be more valuation-sensitive, but overall capital allocation has been prudent and long-term oriented.

Quality Value Investing checklist snapshot with scores and concise rationale: Wide or Narrow Moat: 85 - Multiple durable moats strongest in aviation and marine; defendable niche in wearables. 2) High and Consistent Return on Capital: 80 - High-teens to mid-20s ROIC depending on cash treatment and segment mix; robust operating margins. 3) Revenue and FCF Growth: 80 - Multi-year revenue and FCF growth resumed strongly in 2023-2025 after normalization. 4) High Margins: 90 - ~59 percent gross and mid-20s operating margins with guidance to sustain. 5) Owner-CEO: 80 - Founder-led ethos with long-tenured CEO Clifton Pemble and significant founder influence. 6) Simplicity: 75 - Clear segment model but technical certification adds complexity. 7) Very Low Debt: 100 - No financial debt and large net cash. 8) Dilution: 80 - SBC moderate and offset by buybacks. 9) Favorable Jurisdiction: 85 - Swiss domicile, U.S. listing, strong governance. 10) Trend Alignment and Boringness: 80 - Fitness, outdoor, avionics, and marine tailwinds; not faddish. 11) Superinvestor Inspiration: 70 - High-quality cash generator but consumer-exposed elements dampen typical compounding narratives. 12) Valuation: 60 - Quality is high, but we prefer a disciplined entry multiple versus TTM FCF.

Leadership stability is a positive: CEO Clifton Pemble has led Garmin since 2013, with founder Dr. Min H. Kao serving as chairman, preserving a long-term engineering culture that prioritizes reliability, safety certifications, and vertical integration.

Execution has been consistent across cycles, and guidance discipline is credible, as shown by 2025 outlook revisions following H1 strength. Risks include product portfolio breadth and the need to manage consumer-facing subscriptions carefully to avoid reputational damage. Overall, management quality, engineering depth, and culture are strong.