This Could Change FIT Stock’s Fate
Fitbit Inc (NYSE:FIT) stock has been struggling to find a bottom after management delivered soft guidance for the next quarter. But this good news might shift investor sentiments surrounding FIT stock.
Recall that FIT stock’s southward journey began soon after it showcased the “Fitbit Blaze” at the Consumer Electronics Show (CES) in January. Management pronounced it a “smartwatch,” but the average Joe saw it differently.
For him, a smartwatch was something that competed with the “Apple Watch.” But unlike the Apple Watch, which is a technology-forward smartwatch designed for the high-end consumer market, the Fitbit Blaze is a fitness tracker with a lower price point, targeted at a completely different consumer market.
The good news is that it didn’t take long for the naysayers to realize their mistake.
Fitbit Blaze has finally hit the market and techies have already gotten their hands on it. Early Fitbit Blaze reviews are now out and, believe it or not, they are largely positive. (Source: “Fitbit Blaze Reviews Are In: Is The Stock Crash Justified?,” Forbes, March 8, 2016.)
Better yet, even analysts are now on board with the Fitbit bulls. Dougherty analyst Charles Anderson confirmed that the Fitbit Blaze is “exceeding expectations out of the gate.” He believes that FIT stock will outperform in the near-term. (Source: “Fitbit’s (FIT) Blaze Exceeding Expectations – Dougherty & Co,” Street Insider, March 8, 2016; http://www.streetinsider.com/Analyst+Comments/Fitbits+%28FIT%29+Blaze+Exceeding+Expectations+-+Dougherty+%26+Co/11398592.html.)
In fact, Wall Street traders are also turning bullish on the stock and are buying near-term calls on FIT stock. It makes sense. A whopping 85% of the stock’s float is now short. It’s safe to assume that a short squeeze might soon follow. (Source: “Traders looking to run higher with Fitbit,” Yahoo! Finance, March 8, 2016.)
A short squeeze occurs when traders who’ve shorted the stock come to the market all at once to cover their short positions. This results in an unexpected spike in the stock price.
Plus, bear in mind that Fitbit launched another band in February that hasn’t yet made its market debut. The “Fitbit Alta,” designed for fashion-forward and fitness-conscious females, will likely pull in even better demand.
Recall that Fitbit remained an industry leader throughout 2015 as the biggest global seller of fitness wearables. The company’s ingenious marketing strategy has helped it beat the likes of Garmin, Microsoft, and Apple in the technology wearables industry.
Fitbit’s corporate wellness program, under which it sells its bands in bulk quantities to other big corporations, has helped the company in achieving impressive revenue numbers. At the same time, its strong branding has also driven solid demand from individual consumers.
The Bottom Line on FIT Stock
Management’s soft guidance for the first quarter follows the delayed launches of its two new bands. It will take a while for the bands to make it to retailer inventories, so it’s obvious that the first quarter will see sluggish sales.
However, ultimately, the two new bands are likely going to find even better traction than their predecessors—the “Fitbit Charge” and “Fitbit Surge”—once they penetrate the market.
All in all, Fitbit is likely set for another great year. Investors of FIT stock must have faith.