Does Fitbit Stock Have Further Upside?
When Fitbit, Inc. (NYSE:FIT) first debuted on the stock market earlier this year, many were skeptical if this unicorn IPO would hold up to its valuation. FIT stock had a handsome rally after its initial public offering (IPO), only to tank last month. However, there’s some good news breaking, as the company’s fundamentals are finally starting to make sense to Mr. Market.
According to the latest report from International Data Corporation (IDC) on wearables, the industry posted year-over-year growth of more than 197% in the third quarter. Fitbit claimed the top position on the leaderboard with the highest number of worldwide shipments. (Source: “Worldwide Wearables Market Soars in the Third Quarter,” International Data Corporation, December 3, 2015.)
Fitbit bears have been screaming that the company is losing to “Apple Watch.” Turns out, Fitbit was also a winner this holiday season. Fitbit’s “Charge HR” was a door buster on Black Friday and the “Surge” also remained a hot favorite. (Source: “Fitbit Was A ‘Winner’ Over Black Friday Weekend: Stifel,” Barron’s, November 30, 2015.)
Plus, what the bears often forget is that comparing Fitbit’s brand to Apple’s smartwatch is not an apples-to-apples comparison. The two are often clumped together in the technology wearables market, which may define the broader industry for Fitbit, but it doesn’t define the company’s core business. Fitbit is, specifically, a fitness tracking wearable. It’s focused utility in this niche is what grants it the premium brand recognition and sets it apart from the Apple Watch.
When Fitbit CEO James Park was asked in the latest call if he thought the Apple Watch was a big threat to his brand, Park shrugged off the concern. He reiterated that Apple will have no material affect on Fitbit’s sales. Now, the data from IDC, when compared to the last quarter, agrees with Park.
It is not the Apple Watch, after all, that might be taking a slice out of Fitbit’s pie, since both Apple and Fitbit lost a small chunk of their share. Apparently, Xaiomi and Garmin are the two peers cannibalizing some of Fitbit’s industry sales. Nonetheless, Fitbit continues to enjoy the top position in this space.
So, how is Fitbit maintaining its dominance? Two words: targeted marketing! Fitbit has focused on the health and wellness factor to build itself into a reputed fitness tracking wearable brand. Fitbit has developed a very ingenious corporate strategy under its “Fitbit Wellness” program. The company has reached out to small- and medium-sized businesses and large corporations, inviting them to inculcate the spirit of wellness in their employees.
The result? Big orders from corporate clients that have helped the company drive sales revenue in big chunks. Companies like Target, Bank of America, and Time Warner Cable are among the 70+ corporations that have posted big orders for Fitbit bands for their employees as part of their corporate wellness programs.
The Bottom Line on FIT Stock
Fitbit has had a great third quarter and management is also optimistic on the next quarter. Fitbit’s marketing strategy has so far been on point and the strong Black Friday sales bear an indication of strong demand for the company’s products. I’ve long been bullish on Fitbit stock and see a price uptrend at play.
In a nutshell, FIT stock seems to have promising upside potential.