Fitbit IPO: What it Means for Investors

Fitbit IPOFitbit, a maker of fitness tracking devices, submitted a filing to the Securities and Exchange Commission (SEC) on June 2,2015. The filing was about the company’s initial public offering (IPO). (Source: Securities and Exchange Commission, June 2, 2015.)

Fitbit currently offers six fitness tracking devices: “Fitbit Zip,” “Fitbit One,” “Fitbit Flex,” “Fitbit Charge,” “Fitbit Charge HR,” and “Fitbit Surge.” The company also makes a Wi-Fi-connected scale called the “Fitbit Aria,” which can measure weight, body fat, and body mass index (BMI).

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Fitbit’s IPO

According to Fitbit’s filing to the SEC, the company plans to issue 22.4 million shares priced between $14.00 and $16.00 a share. This would raise $358 million in the offering. There are also 7.5 million shares that existing stockholders are expected to sell. Add them up and the total value of the IPO is around $448 million.

Fitbit stocks are expected be traded on the New York Stock Exchange under the ticker symbol “FIT.”

Also Read: Fitbit IPO: Everything You Need to Know

Fitbit’s Growth

The company has grown significantly over the last few years.

In 2011, Fitbit sold 200,000 fitness tracking devices. In 2012, the number grew to 1.3 million, continued to surge to 4.5 million in 2013, and to an astonishing 10.9 million in 2014.

As one would expect, revenue grew in a similar fashion—from $14.5 million in 2011, to $76.4 million in 2012, $271.1 million in 2013, and $745.4 million in 2014.

Net income, on the other hand, was going in the same direction, except for a product recall, in 2013. From 2011 to 2013, the company had net losses at $4.3 million, $4.2 million, and $51.6 million, respectively. Fitbit finally turned profitable in 2014, making $131.8 million in net income. Part of the success was due to a rise in international sales.

Fitbit’s Competition

Fitbit has come a long way from its inception in 2007. The filing says right now it is the largest producer of fitness tracking devices in the U.S. However, competition is getting fierce in the market.

According to a report by the IDC, Fitbit’s shipment volume more than doubled in Q1 2015 compared to the same quarter last year. But its market share is actually declining. In the first quarter of 2014, the company had 44.7% of the market. In Q1 2015, Fitbit only has a market share of 34.2%. (Source: IDC, June 3, 2015.)

One important competitor is the Chinese company Xiaomi Inc., known for making cell phones. Xiaomi was not in the fitness tracker business at this time last year. However, since the launch of the ultra-cheap $14.99 “Mi Band” last summer, Xiaomi has gained an enormous following for its fitness tracking device. In Q1 2015, Xiaomi shipped 2.8 million units of the device, capturing 24.6% of the market. To read more about Xiaomi, see “Xiaomi Valued in the Billions, Approaching IPO?

Xiaomi is not the only new entrant in the business. Apple Inc. (NASDAQ/AAPL) recently came out with the Apple Watch, which can also function as a fitness device. Microsoft Corporation (NASDAQ/MSFT) is also entering the game with its version of a fitness tracker—“Microsoft Band.”

Also Read: Fitbit IPO: Fitness Tracker Maker Raising $358 Million

What Can Investors Expect?

Fitbit has a line of physical products and has solid revenue growth. Despite the recall issues, Fitbit managed to turn profitable last year.

Over the last few years, there has been a surge of IPOs. Companies are getting extreme valuations without actually making any money or without a clear direction on where the company might be going.

It shouldn’t be surprising to see investors actually rushing towards Fitbit stock on its debut day. This company is different than many others and offers solid growth potential in both revenue and profit.

Also Read: Is the FitBit IPO Valuation Justified?