Fitbit Stock Crashes as Competition from Apple and Microsoft Increases

Fitbit StockFIT Stock Plummets After Announcement of Microsoft Band 2

Fitbit Inc. (NYSE:FIT) stock tumbled this week following Microsoft Corporation (NASDAQ:MSFT) releasing its newest wearable fitness device, the Microsoft Band 2.

The FIT stock price has tanked by more than six percent since Microsoft’s unveiling of the Band 2 on Tuesday, dropping to a multi-week low of $34.33 per share on Wednesday before rebounding slightly.

While Fitibit manufactures what are arguably the most recognizable wearable fitness devices in the world, the release of Microsoft’s Band 2 poses a serious challenge to the San Francisco-based company.

The Fitness Device Game is Starting to Heat Up

The two devices have similar features, but both surpass the other in some key areas. Microsoft has notably included a sleep-tracker, step counter, and elevation gauge in the new Band 2. (Source: IB Times, October 6, 2015.) The first version of the Band was lackluster, without many of the distinguishing features that have propelled Fitbit to become one of the most talked-about stocks in the world at the moment. But that has all changed now. The Band 2 comes well equipped with 11 sensors to monitor a person’s health, along with a host of new features, which all run on Windows 10. (Source: Yahoo Finance, October 8, 2015.)

But Microsoft isn’t the only competitor that Fitbit will have to take into account. Apple Inc.’s (NASDAQ:AAPL) watch may not be a wearable fitness device per se, but is perfectly capable of acting as such through the installation of third-party fitness apps. Its powerful processor and upgrade potential means it might become a significant rival to Fitbit. Both the Band 2 and Apple Sport watch contain voice-activated Cortana and Siri systems, respectively, allowing easy and instant access to e-mails, composing text messages, or simply just checking the weather. (Source: Tom’s Guide, October 6, 2015.) Fitbit’s platform lacks that depth, though it does offer GPS capabilities that the Apple Sport Watch does not.

But there is a silver lining for Fitbit; when it comes to battery life, it reigns supreme, (Source: CNET, September 11, 2015.) The Apple Sport Watch might have more features, a quicker processor, and be far more upgradeable than its rivals through the use of apps, but it has to be charged nightly. The Band 2 performs slightly better, but would still have to be charged several times a week. Fitbits can reportedly last up to five days, which is a considerable plus for busy people on the go.

Are we on the brink of a fitness tracker war?

Analyzing which of the aforementioned devices will appeal most to health-conscious consumers is tough, as it depends on a whole host of things. The most pivotal things to consider, of course, are the features they offer and their prices, but also the direction in which the company is going.

Fitbit Investors are Getting a Blunt Reality Check

Analysts have been quick to name Fitbit yet another one-hit-wonder, much like the iconic BlackBerry and now perhaps even GoPro Inc. (NASDAQ:GPRO). (Source: Investing, October 6, 2015.) Such companies tend to be great buys at the beginning, making great products that fill an emerging market niche, but they tend to burn out quickly, unable to evolve past the initial success built on a single idea.

The FIT stock price had initially surged after the company’s IPO in June, with share prices hovering above $51.00. Reality seems to have hit Fitbit like a ton of bricks, and it was the plummeting stock price to prove it. Fitbit stock may come under even heavier pressure as competition builds in its market segment. With companies such as Microsoft, Garmin, and Apple entering the wearable fitness tracker market, and armed with exponentially greater financial resources than Fitbit, the upstart young company might well be headed the way of BlackBerry.

Where Will the Fitbit Stock Price Go From Here?

The bottom line is that with slowing company growth, shrinking profit margins, lower pricing power, and a surge in competition, Fitbit will either have to evolve or will go the way of the dinosaur. For these reasons and others, I remain very cautious on FIT stock.