Apple Watch hasn’t even launched yet and it’s already claimed its first victim: Garmin.
Garmin, which makes the popular GPS system for cars, is also a leader in the GPS fitness watch business. But with increased competition from Apple, Fitbit, and TomTom, analysts at Citi say that the company’s “stronghold” in this business will likely erode over time.
In its note on Monday, Citi downgraded shares of Garmin to “Sell” and put a $US42 price target on shares. Garmin shares closed last Thursday at around $US46.50 and are down 16% in the last year.
On the long-term threat from Apple Watch, Citi writes, “The Apple Watch is a very modest threat this year as current interest in the running community appears low, but Apple’s product positioning, the likely addition of GPS and likely lower price points in future versions are significant long-term headwinds.”
Citi conducted a survey at the New York Road Runners 10k in Central Park on March 29, and here’s what they found out that 37 runners used GPS watches during the race. Here’s what those folks had to say:
[Of] these 37 runners using a GPS fitness watch, 8 said they would buy the Apple Watch to train and/ or race (~20%), 19 said they would not buy it (~50%), while 10 did not know enough about it to have an opinion (~30%). The main reasons we heard from runners for not buying an Apple Watch to train and/ or race were 1) price point (the Apple Watch starts at $US350 while a Garmin Forerunner starts at $US130) and 2) the lack of built-in GPS as some runners object to taking their iPhones with them on a run. Interestingly, a triathlete said he would absolutely buy the Apple Watch, but would use it only to train; on race day, he would keep using his Garmin 310XT.
Citi also noted that at the Apple Watch event, the company featured model Christy Turlington Burns, who is training for a marathon using Apple Watch, which Citi took as a clear signal that Apple is targeting casual runners as an important consumer segment for its Watch.
And over the long-term, Citi sees “pricing pressure” from Apple Watch weighing on Garmin’s offerings, which basically means that they think Apple’s stuff will get cheaper over time.
Via Citi, here’s what the firm found on how runners track their performance, and how runners might respond to Apple Watch over the long term.