Why I’m Watching Garmin From the Sidelines Despite the Fitness Boom

I keep seeing the fitness boom in real life before it shows up in the numbers. The trouble is, so does the market — and at $232, the stock already assumes Garmin keeps winning.

Somewhere over the last eighteen months, half the people I know turned into runners.

Group chats that used to be about football fixtures are now Strava kudos and half-marathon training blocks. Friends who’d never hiked further than a beer garden are posting elevation profiles from the Lake District.

And almost without exception, when someone gets serious — past the “couch to 5k app” phase and into the “I have a training plan” phase — the same thing ends up on their wrist. Not an Apple Watch. A Garmin.

That’s the kind of signal I pay attention to, because it’s the sort of thing you see on the ground a few quarters before it’s fully baked into a spreadsheet. Wall Street can’t survey my five-a-side group.

So I went looking for the gap between what I’m seeing and what the model says. I found it. And then I found the problem with it.

What you’re actually buying

Garmin (NYSE: GRMN) is not just a watch company. But rather a vertically integrated hardware business — which does its own silicon-level design, writes its own software, and manufactures a large chunk of its own product across the US, Taiwan and Europe.

That full-stack ownership is why a hardware company throws off ~59% gross margins and ~26% operating margins, numbers that normally belong to software.

It runs five segments:

• Fitness (running/cycling watches, smartwatches) — FY25 revenue $2.36B, up 33%, now the largest and fastest-growing segment.
• Outdoor (adventure watches, inReach satellite communicators, golf) — $2.05B, +5%, and the highest-margin line at roughly 66% gross.
• Aviation (certified flight decks, autopilots) — $0.99B, +13%; a business protected by multi-year certification moats.
• Marine (chartplotters, sonar, audio) — $1.18B, +10%.
• Auto OEM (domain controllers for carmakers) — $0.67B, +9%, and still the problem child at a ~$49m operating loss.

The consumer lines (Fitness + Outdoor) are ~61% of revenue and carry the cyclicality.

Aviation and Marine are the ballast: sticky, high-barrier, high-margin franchises that don’t blink when discretionary spending wobbles.

Underneath it all sits a fortress balance sheet — about $4.1B in cash and marketable securities, effectively no debt, ~$1.4B of annual free cash flow, a 17% dividend hike and a fresh $500m buyback.

Arbitrage

FY25 was a record across the board. Revenue grew 15% to $7.25B, operating income rose 18% to $1.88B, EPS hit $8.59, and the company shipped over 20 million units. All five segments printed record revenue in the same year — which almost never happens.

Crucially, the momentum didn’t stop at the calendar turn. Q1 FY26 already beat, with revenue up 14% to $1.75B and adjusted EPS of $2.08. Engagement is climbing too — Garmin Connect activity was up roughly 8% on the year, which is exactly the kind of usage data that turns one-time buyers into Connect+ subscribers and repeat upgraders.

And here’s the texture that matters for my thesis: Garmin has a long, boring, reliable habit of guiding conservatively and then raising. Management sets the bar low and steps over it.

Where I split from the Street

Now the disagreement. For FY26, Wall Street has Garmin decelerating hard — consensus is roughly 10% revenue growth and 11% earnings growth, easing further into FY27. The official company guide is even gentler: ~$7.9B revenue (+9%), >$2.0B operating income, and ~$9.35 pro forma EPS.

I don’t buy the deceleration. The fitness adoption curve I’m watching in real life hasn’t rolled over — if anything it’s still steepening, and it’s premiumising.

Put that together with Garmin’s guide-low-beat-later DNA and a re-accelerating Outdoor launch slate in the back half of the year, and I think FY26 can look a lot more like FY25 than like the consensus glide path.

Call it high-teens to ~20% growth again, not ~10%.

This is the informational arbitrage. I’m extrapolating what I can physically see: a structural, multi-year behavioural shift toward running and hiking among exactly the demographic that buys these devices.

So far, so bullish. But here’s where it gets uncomfortable.

Here’s the catch: being right doesn’t pay at $232

I ran the valuation expecting it to confirm the buy. It didn’t. Garmin has already re-rated.

It used to trade like a ~15x “GPS hardware” stock; today it’s ~24x forward earnings and ~5.6x sales. On the peer screen, that forward multiple is actually in line with the comp-set average (~22x P/E, ~4x EV/sales once you strip out a distorting outlier).

What justifies Garmin’s premium is its margin — a ~23% net margin versus a peer average closer to 15%. But — and this is the uncomfortable part — its growth on consensus numbers (~10% revenue, ~12% earnings) is also right in line with that same peer group. You’re paying a premium multiple for peer-average growth, carried entirely by margin.

Now run the price targets on FY27 estimates:

Blend all four and you get roughly $228 — essentially today’s price of $232.51, for a hair of downside. Lean on the multiples I actually think a maturing consumer cyclical deserves once the big growth spurt is behind it (22x earnings, 4x sales), and the “ideal” entry drops to about $204.

Then I stress-tested the bull case against itself. What if I’m dead right and Garmin repeats its FY25 growth — ~15% sales, ~18% earnings — instead of decelerating? Run that through the same reasonable multiples and you land at about $230.

Read that line again, because it’s the whole argument: even if my non-consensus growth call is correct, fair value is still only ~$230. At $232.51, the stock is already discounting a beat.

That’s the trap in re-rated quality compounders. Two levers move the price — faster growth and a richer multiple — and at this point each lever, pulled on its own, just gets you back to roughly where the stock already trades.

To actually make money from here you need both to fire at once: a genuine growth surprise and the market’s willingness to keep paying ~25x for it.

My problem is that I believe in the first and not the second. The whole reason a consumer-cyclical name re-rates down is that the growth has, by definition, already happened — and the market knows to stop paying a growth multiple right around the time the growth shows up.

Being right on the fundamentals and the multiple compressing anyway are not contradictory outcomes. They’re the normal outcome.

So the edge is real. It’s just already in the price.

What could go wrong (and a tempting alternative)

To keep myself honest, the bear case is not flimsy:

• The comps get brutal. Lapping a +33% Fitness year (it was +42% in Q4) is a high bar, and wearable upgrade cycles are inherently lumpy. My “boots on the ground” read could simply be a pull-forward, not a new baseline.
• Margins face a real headwind. Memory and component inflation plus tariffs are guided to bite — gross margin is already guided down to 58.5% for FY26, with the bigger hit flagged for 2027. A premium multiple and a margin miss are a bad combination.
• Auto OEM keeps bleeding, and its path to profitability depends on a concentrated set of automaker programs.

One honest aside: while screening the peers, Amer Sports (AS) jumped out as arguably the cleaner long expression of this same fitness-and-outdoor consumer trend — ~22% revenue and ~29% earnings growth, a similar forward P/E, but roughly half Garmin’s EV/sales multiple.

If the thesis is “the West is getting fitter and trading up,” it’s worth asking whether Garmin is even the best vehicle for it. That’s a rabbit hole for another piece — but I’m not ignoring it.

So what’s the actual trade?

Here’s where the discipline lives. Everything above says the same thing: great company, fully-valued stock. I’m not a buyer at $232.51. Chasing quality at a price that already embeds your edge is how good theses turn into flat-to-down P&L.

The setup I actually want is a pullback. If GRMN drifts back toward ~$200 over the next few weeks — and nothing in the fundamental picture has changed, which is the part I can monitor in the real world before the next print — then the risk/reward finally tilts.

At ~$200 I’m buying a high-quality compounder roughly in line with my conservative fair value, with my non-consensus growth call as the free option on top.

How I’d express it: a calendar / diagonal bull call spread rather than buying stock or a naked call. The logic fits the situation almost perfectly:

• Defined downside. If I’m wrong about the growth and the entry, the most I lose is the net premium. No open-ended risk on a name where I’m explicitly worried about a de-rating.
• It pays me to be patient. By selling near-dated calls against a longer-dated long call, I harvest premium/theta while I wait — earning credits that finance the position instead of bleeding time value, which matters when the whole thesis is “give it two prints to play out.”
• It matches the holding period. I want to hold through roughly the next two quarters — so the structure is built to survive and benefit from that exact window, rolling the short leg as I go.

Bottom line

Garmin is one of the better businesses on my screen — profitable, debt-free, cash-generative, and quietly riding a structural shift toward fitness that I can watch unfold without a Bloomberg terminal. My disagreement with the Street on growth is real and I’ll stand behind it.

But the trade and the company are different questions. At $232, the stock already assumes Garmin keeps winning, and even my bull case only gets fair value back to ~$230. The edge isn’t the read — it’s the entry. So I wait. ~$200, defined-risk calendar spread, two quarters, and let the people on the trails be right before the analysts are.