- Morgan Stanley is out positive on Garmin (NASDAQ:GRMN) this morning, after meeting the co's management. Firm notes they came away more positive about current business conditions and believe the stock can continue to rally from oversold levels, potentially reaching $80-85 near-term. Garmin is not seeing signs of economic weakness impacting its US business and management believes concerns surrounding European personal navigation device (PND) market saturation are overblown as they expect market unit growth of at least 40% in 2008 in all but the most penetrated countries, with Garmin taking share. MSCO continues to expect Garmin to guide 1Q08 gross margins up q/q, easing investor worries, and management suggested that the seasonal mix shift to higher-end, higher margin devices they are anticipating could be even more pronounced. They remain more concerned than consensus about Garmin’s prospects for 2008 as they expect the margin relief to be temporary and believe negative structural trends in mix and pricing should make it difficult for the stock to sustainably outperform.

They are skeptical of Garmin’s ability to penetrate the handset market and would prefer to see a greater focus on software partnerships rather than the nuvifone hardware approach.

Notablecalls: I like the way MSCO is turning positive on GRMN here.