Editor's note: This column was submitted by Stockpickr member Faisal Laljee, author of StocksandBlogs.com.
It seems like every new car, even those priced less than $25,000, has a built-in navigation system, and even those that don't will offer it as an option. I live in Los Angeles, where driving is like eating -- everyone does it, so it is not uncommon to glance at the car sitting next to you in traffic and see a GPS navigation system on the dashboard. Nationwide, however, navigation systems have a market penetration of less than 10%.
The two players worth a gander in this space are
Garmin manufactures navigational devices based on global positioning system. Its products include automotive products in cars and trucks; recreational products used by adventurists, hikers and athletes; and aviation systems used by aircrafts. Navigation systems make up a fast-growing segment of consumer electronics, growing faster than digital cameras and flat-panel televisions. Last year alone, Garmin sold 5 million units, and 2007 sales growth is projected be 40%. The company has more than 50% market share in the U.S. automotive market.
Earlier this year, Garmin began to sell its lower-end units at
, which will only help its numbers going forward. Additionally, it has growth opportunities in the marine and aviation sectors.
Garmin just reported second-quarter earnings this morning,
by 26 cents analysts' expectations of 74 cents a share. Revenue rose 72% to $742 million from $433 million a year ago. Analysts were expecting revenue of $645.6 million.
The stock has been a star performer over the last couple of years, including a 48% gain in just the last two months. I recommended this stock on my blog back on May 25 as one of
and before that on
and for the first time back in
when I first started blogging. Depending on when you bought it, you may be up 45% to as much as 135%.
With no debt and earnings projected to grow 25% to 30% over the next three years, Garmin remains a solid investment here, and I recommend accumulating on pullbacks.
Navteq reported earnings Tuesday night, and the results reflect the strong growth in this sector. Navteq provides the digital maps and software used by mobile phones, navigation systems and technologies like Google Earth.
Revenue was up 49%, and earnings grew 72% over last year's second quarter. In other words, the company crushed estimates by 14 cents a share. Navteq also increased its 2007 guidance by 20% over the outlook given at the end of the first quarter.
The company has no debt and is pretty much one of only two players in this market (the other being U.K.-based Tele Atlas).
, Traffic.com, Garmin and a host of other technologies use Navteq's digital maps and navigational software, which has information on 12 million miles of road in 69 countries. From satellite images to aerial photography, Navteq has used an extensive number of sources to ensure accuracy.
One of its key selling points is its user feedback. Its Map Reporter program allows customers to report any inaccuracies. Additionally, Navteq has more than 700 employees who dedicate a good amount of their time to driving around, capturing 225 different attributes for every block of road including one-way signs, turn restrictions, lane information, obstacles in the road and points of interest that may include hotels, gas stations and restaurants.
With the advent of GPS on mobile phones like
Research In Motion's
new 8830 World Phone, Navteq has the opportunity to target a market that has less than 1% penetration. The future seems bright for Navteq, and I recommend buying the stock.
At the time of publication, Laljee was long Research In Motion, although positions may change at any time.
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