Fitbit Stock Could Skyrocket
While everyone was fighting it out for the best Black Friday leader, Fitbit, Inc. (NYSE:FIT) was the real winner of the shopping holiday. FIT stock got a seven percent bump in the last few days, as consumers showed a preference for Fitbit devices.
This is the kind of event investors have been waiting for. Fitbit stock has been pummelled in the five months following its initial public offering (IPO), but it could rebalance in the coming months. It appears that Wall Street may have gotten this one wrong.
Too many analysts turned on FIT stock after the company went public. Fitbit was facing aggressive competition from other startups, but Apple Inc. (NASDAQ:AAPL) was the main threat to its market share.
The “Apple Watch” was supposed to end Fitbit’s dominance of the fitness wearables market. Wall Street assumed that the niche appeal of Fitbit would be unable to weather the onslaught of a monster technology firm like Apple. The Apple Watch’s integration with other Apple devices was supposed to make it unbeatable, but consumers don’t seem to agree. Instead, Black Friday shoppers were loading up on Fitbit devices in the shopping frenzy that followed Thanksgiving. (Source: “Target Reports Strong Start to Black Friday Weekend Online and In Stores,” Barron’s, November 27, 2015.) Here’s why…
FIT Stock vs Apple’s Watch
The compatibility of Apple’s devices has traditionally been a selling point for the company. With the Apple Watch, the company wanted to plant a firm foot in the wearable technology space. Users could use their smartwatch for more than just fitness tracking; it would become an extension of their “iPhone.”
Texts, calls, music, and apps all flow through the Apple Watch, making it the most sophisticated wearable technology we’ve ever seen. So why are people opting for Fitbit devices instead? There are two main reasons I can identify.
For one, there’s the noticeable difference in price. If someone just wants a device to help track his or her fitness goals, then $100.00–$120.00 seems like a reasonable price. That’s the range for Fitbit’s basic models, which appeal to people who don’t own an iPhone.
There are a lot of “Android”-based smartphones out there. Is it reasonable to expect the people who own them to rush out for an Apple Watch? Nope. The appeal simply is not strong enough to warrant the absurdly high price level; for this crowd, going to the gym shouldn’t break the bank.
That’s one of the reasons that Fitbit has an edge on Apple. Customers can process the Fitbit Charge HR as an athletic wear purchase in their mental accounting, but the Apple Watch would classify as a big-ticket gadget.
The second advantage is that smartwatches don’t yet have enough useful functions to make them an essential tool. Don’t get me wrong; they are cool showpieces, but I’m not convinced they’ll dramatically alter my day-to-day experience.
Until smart watches become an absolute necessity, they won’t open the kind of growth Apple investors had expected.
Look Out for a Fitbit Stock Resurgence
I see a clear upside for Fitbit, as the U.S. economy recovers from its post-crisis gloom. Consumers are accumulating a little bit of cash in their pockets and are eager to spend some of it. If you don’t believe me, try watching some Black Friday videos on YouTube.
However, pricing issues ensure that customers are steered to niche products like Fitbit devices, rather than full-fledged smartwatches. Considering that FIT stock has hit a peak of $51.64, I wouldn’t be surprised to see it bounce back to $50.00, $55.00, or even $60.00.