Strong Sales Could Boost FIT Stock
You might think that Fitbit, Inc. (NYSE:FIT) stock has lost most of its hype and is going to stay low. Sure, Fitbit’s stock price plunged quite a bit, but one thing is turning analysts into FIT stock bulls—the holiday season.
Brad Erikson, analyst from Pacific Crest, said Fitbit’s holiday sales were “exploding.” His in-store checks suggest that there has been “a substantial increase in sales volumes” compared to a month ago. Around one-third of Best Buy stores are struggling to keep the $150.00 “Fitbit Charge HR” band in stock. (Source: “Fitbit Holiday Sales ‘Exploding’, Says Pacific Crest,” StreetInsider.com, December 21, 2015.)
Note that unlike many of its competitors, Fitbit is not going heavy on discounts. According to Brad Erikson, there has been a “prevalence of discounting across the category by Garmin, Apple, etc, which has not included Fitbit.” The lack of discounts combined with tremendous sales confirms Fitbit’s market power in the fitness tracker industry.
Instead of just focusing on consumer sales, Erikson also mentioned Fitbit’s corporate strategy. The analyst said “we note that corporate wellness is a huge and growing opportunity for which Fitbit is in the lead and this remains heavily discounted by most investors we talk to.” In the third quarter of 2015, 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.
Erinn Murphy, analyst from the Piper Jaffray, also indicated the increasing popularity of Fitbit products. She noted the company’s “increased promotional activity” during the holiday season and believes that the fourth quarter would be great for FIT stock. The analyst maintained an “Overweight” rating on the company and a price target of $60.00, which is more than double Fitbit’s stock price today. (Source: “Fitbit Holiday Sales ‘Exploding’ as Christmas Nears,” Investors.com, December 21, 2015.)
The key to note is that Fitbit is still the hottest product in its segment. On Amazon.com, the top four best sellers in the sports and fitness category are all from Fitbit. Among the top 10 best sellers in the category, seven are Fitbit devices. (Source: “Best Sellers in Sports & Fitness,” Amazon.com, last accessed December 22, 2015.)
The neat thing about Fitbit is that it is not just a niche product, but rather something with a lot of mass-market appeal. It might have started with those who had very active lifestyles, but more and more people are putting Fitbit devices on their wrists. Even
President Obama has one. He was first spotted wearing a “Fitbit Surge” in March of this year and was spotted still wearing it in October. If the leader of the free world hasn’t ditched his Fitbit, why should you?
Jokes aside, the mass-market appeal of fitness tracking devices is crucial to its future success. If a company manages to become a leader in a mass-market product or service, it could grow exponentially. Just look at the success stories of Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Facebook, Inc. (NASDAQ:FB).
In short, FIT stock could become as hot as its fitness trackers.
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