Forget the FIT Stock Bears; Here’s Why Fitbit Inc. Could Soar

fit stock bearFitbit Inc. Is Still a Market Leader

Wearable tech company Fitbit Inc. (NYSE:FIT) went public earlier this year with its stock price surging as much as 50% on its initial public offering (IPO). The upward momentum continued until early August, but then, with the U.S. stock market crash, FIT stock tanked and hasn’t really recovered much. However, investors should take note that Fitbit still has the upper hand in the fitness tracker industry and its consistent growth could send FIT’s stock price a lot higher.

Despite all the hype about Apple Inc.’s (NASDAQ:AAPL) launch of the “Apple Watch” and Chinese smartphone maker Xiaomi Inc.’s ultra-cheap “Mi Band,” Fitbit is still the leader in the niche industry of fitness tracking devices.

According to the most recent report by International Data Corporation, Fitbit’s shipment volume increased an incredible 101.7% year-over-year to 4.7 million units in the third quarter of 2015. The company also retained its number one position in the market, with a 22.2% market share globally. (Source: “Worldwide Wearables Market Soars in the Third Quarter as Chinese Vendors Challenge the Market Leaders, According to IDC,” International Data Corporation, December 3, 2015.)

One thing that’s been helping with Fitbit’s growth is its corporate wellness strategy. You see, a lot of companies are buying fitness tracking devices for their employees. During the third quarter, North American retailer Target Corporation (NYSE:TGT) ordered 335,000 fitness trackers for its employees. More than 70 of the Fortune 500 companies have now deployed Fitbit devices to their employees.

There have been concerns about competition from Chinese companies, such as Xiaomi. Xiaomi’s Mi Band, first launched in July of last year, has enjoyed tremendous growth. In 3Q14, it only shipped 0.4 million units; in 3Q15, shipment volume skyrocketed to 3.7 million units.

However, note that more than 97% of Xiaomi’s volumes were shipped within China, while volumes outside of China remain limited. The story is similar to that of Chinese wearable maker XTC, a subsidiary of BBK. The company beat Samsung for fifth position in the quarter, but its focus was exclusively within China.

Fitbit, on the other hand, is expanding all over the world. In the third quarter, revenue from the U.S. only accounted for 66% of Fitbit’s revenue, while 16% came from the APAC region, 12% from EMEA, and six percent from the other Americas. Notably, APAC revenue increased 314% year-over-year and EMEA revenue surged 282%. With such strong growth rates overseas, Fitbit is expanding its presence across the globe.

Another concern might come from smartwatches. With smartwatches being developed and marketed by Apple, Motorola, Pebble, and Samsung, will Fitbit’s success be endangered? As it turns out, Fitbit has little to worry about. According to the IDC’s data, the average smartwatch costs slightly more than $400.00, while the average fitness tracker comes in at just $94.00.

That is a huge difference! Moreover, smartwatches are also heavier and have a shorter battery life compared to basic fitness tracking devices. Therefore, like IDC said, “there has been little sign of product cannibalization” when it comes to smart watches in the wearable tech industry.

The Bottom Line on FIT Stock

With the holiday season continuing and New Year’s resolutions coming up, it’s likely that Fitbit’s growth will be further strengthened and its stock price could climb a lot higher.

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