Analysts Raise FIT Stock Estimates
It’s been a tough year for Fitbit Inc (NASDAQ:FIT) stock, having shed nearly 50% since the start of the year. That actually sounds decent considering that FIT stock was down about 60% for the year when it hit an all-time low in late February.
So what happened?
In early January, Fitbit unveiled its first-ever smartwatch, the “Fitbit Blaze.” FIT stock immediately began to plummet as investors were underwhelmed with its lack of standout features. Investors wanted to see something like Apple Inc.’s (NASDAQ:AAPL) watch, but instead they got a fitness tracker with a screen. After the unveiling, FIT’s stock immediately dropped 18% over the next few days and has continued to fall since.
The Fitbit Blaze was released in March and recent signs are suggesting the watch will be a bigger hit than initially thought. Few saw this coming and that has now led to at least two firms raising their outlooks based on higher-than-expected sales of the company’s latest products. FIT stock surged 12% on the news.
Citigroup analyst Stanley Kovler and Pacific Crest analyst Brad Erickson both pointed to sales for Fitbit’s newest products, the Blaze and the “Alta,” as their main reason for raising their estimates.
In a note to clients, Erickson said that based on his checks and Fitbit’s positive preannouncement, he is estimating that about 1.3 million Blaze devices have been sold in the first quarter.
Earlier this month, Fitbit announced that it has sold more than a million Blaze smartwatches in the first month since its February 27 release date. The company also said that it sold more than one million units of the latest version of its Alta fitness tracker that went on sale on March 9.
FIT stock rallied about 20% since the announcement prior to Wednesday’s jolt in price. So it looks like after a long decline, FIT stock is gaining steam.
Now, you may want to pay attention to this tidbit.
The positive product checks have also led Citigroup’s Kovler to reiterate his “Buy” rating on Fitbit stock with a price target of $30.00. (Source: “Fitbit: Citi Checks Show ‘Significant’ Expansion Opportunity After Earnings,” Benzinga, April 13, 2016.) At today’s price per share of $16.65, that implies a whopping 80% upside in FIT stock.
“We believe the encouraging initial Alta/Blaze sales and improving app rankings support our view that FIT’s fiscal year 2016 revenue guidance may prove conservative and expect upside to Q1 guide and positive Q2 outlook to propel shares off recent lows,” Kovler said. (Source: Ibid.)
If you noticed sales rankings on Amazon.com, Inc. (NASDAQ:AMZN), none of this should be a surprise. The Fitbit Blaze is the number one selling smartwatch, with 81% of the 1,380 reviews giving the watch a four- or five-star rating.
Another hint on the potential success of the Fitbit Blaze came a few weeks ago. Bank of America Merrill Lynch analyst Nat Schindler believed his peer group was underrating the potential of the wearable device, as it was most likely selling well, according to his channel checks.
“We checked retailers websites including Best Buy, Target, and Kohl’s and found retailers experiencing delayed shipping or individual store outages likely indicating Blaze has sold well since launch,” Schindler said in note to clients. “In addition, many stores restocked which may indicate that FIT had a retailer reorder of Blaze during 2Q which was not included in guidance.” (Source: “New Fitbit Checks Show Analysts Are Underrating Blaze Potential,” Benzinga, March 15, 2016.)
Citigroup’s Kovler added that he believes international expansion is going to be a big catalyst for FIT stock. He said that his firm’s analysis of Fitbit’s app downloads overseas will be a key factor in expanding the company’s presence into new markets. (Source: Ibid.)
Although Fitbit hasn’t broken down revenue by regions for investors, international revenue is soaring. In the second quarter of 2015, Fitbit reported that international revenue increased 250% over the previous year. (Source: “Fitbit Reports Second Quarter 2015 Results,” Fitbit Inc, August 5, 2015.) That number was largely fuelled by EMEA and APAC growth of 301% and 292%, respectively, over the previous year.
The Bottom Line on FIT Stock
It looks like the Fitbit Blaze and the Alta are going to be smash hits for Fitbit. When official sales data for the devices is released next earnings call, the results could be a boon for FIT stock. Investors may want to take a look at Fitbit before a possible bullish run for the stock.