Morgan Stanley upgraded Garmin to Equal-weight from Underweight, saying the investment bank's prior cautious stance has largely run its course given the consumer electronics firm's updated 2026 guidance.
The bank established a $252 price objective, calculated as 24 times Garmin's 2027 earnings per share estimate of $10.49. Morgan Stanley noted that Garmin's current valuation at roughly 22 times earnings is broadly consistent with historical norms and represents a modest discount to the S&P 500 when the firm's updated growth assumptions are taken into account.
Garmin issued guidance for 2026 calling for approximately 9% revenue growth, which equates to about $7.9 billion in sales. Morgan Stanley's own modeling is more optimistic: the bank now projects 12% year-on-year revenue growth and 11% earnings-per-share growth for 2026. Those forecasts sit 6% and 8% higher than consensus estimates for revenue and EPS, respectively.
In explaining the gap between Garmin's guidance and Morgan Stanley's estimates, the brokerage argued that the company's outlook appears conservative. Factors cited by the bank include Garmin's historical seasonal patterns, the possibility that an Outdoor segment product launch could arrive earlier than company guidance implies, and Garmin's track record of surpassing initial revenue targets.
On profitability, Garmin guided to a 58.5% gross margin for 2026, a contraction of 20 basis points from the prior year. Morgan Stanley interpreted that figure as indicating less margin pressure than the bank had previously modeled. The analyst team expects changes in product mix to counter potential softness in Outdoor and Fitness; margins in Marine, Auto OEM and Aviation were described as expected to remain stable.
The brokerage also drew attention to Garmin's inventory decisions, noting the company built raw materials stock ahead of an anticipated memory cost upcycle. Morgan Stanley views that inventory build as a mitigating factor against the risk of rising component prices. The bank projects Garmin's operating margin will reach the company's 25.5% target in 2026, and it said that any upside to revenue would likely flow to earnings.
Finally, Morgan Stanley pointed to a proposed 17% dividend increase as an indicator of potential upside to the company's earnings guidance, based on Garmin's historical payout ratios.
Context and implications
The upgrade and revised forecasts reflect Morgan Stanley's confidence in Garmin's near-term revenue trajectory and margin resilience, citing product mix dynamics, inventory positioning and shareholder returns as supporting evidence for a firmer 2026 outlook.