Garmin Ltd. (NYSE:GRMN) shares are trading lower after BofA Securities analyst Ronald J. Epstein downgraded the stock to Underperform from Neutral and cut the price target from $165 to $150.

The analyst writes that in the first quarter, Garmin demonstrated the strength of its brand and the resiliency of its customers and witnessed growth across segments. However, the analyst worries that the momentum is decelerating, implying that the current valuation is unsustainable.

Epstein says that the company's AutoOEM segment continues to ramp production and remains on track to hit the $800 million revenue target in 2025.

The analyst expects the segment to reach breakeven in 4Q24 and sees an upside risk as Garmin's domain controllers will be spread across all Bayerische Motoren Werke AG (OTC:BMWYY) BMW's fleets with the iDrive infotainment systems.

The rapidly growing Auto contribution to total revenues is expected to pose a headwind to company margins, and the analyst projects revenue of $635 million at an operating margin of (4.3%). Epstein estimates EPS of $5.66 in FY24 and $6.50 in FY25.

This month, Garmin reported first-quarter revenue increase of 20% to $1.38 billion, surpassing estimates; proforma EPS of $1.42 beat the consensus.

Garmin stock gained 55% in the last 12 months. Investors can gain exposure to the stock via Global X Internet Of Things ETF (NASDAQ:SNSR) and Procure Space ETF (NASDAQ:UFO).

Price Action: GRMN shares are down 4.92% at $162.33 at the last check Wednesday.

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