Companies to Watch: Fitbit

Companies to Watch: Fitbit
July 6, 2016 Market Traders Institute

 

It’s pretty common for the stock experts to disagree on the future of a company.  Some say the company’s future looks bright while others say it’s reached its peak. This is especially true when it comes to Fitbit.

 

Fitbit is a major player in the wearables market.  Wearables include things such as Apple watches, GoPro cameras, Samsung Galaxy watches and more.  Analysts are split over the future of the wearables market, and therefore are split over the future of Fitbit’s motion tracking devices.

 

The Good

It’s no surprise that Fitbit is in the position it’s in.  Health and Fitness is a majors moneymaking category in the retail industry.  Everything from running shoes and yoga pants, to pedometers and health food, even viagra, nizagara and cialis doing your body right has never been more popular.

 

Fitbit is a product of that mindset.  By putting a Fitbit on your wrist or hip, you can count the amount of steps you take per day.

 

They were the first brand in the market for these type of devices, so they have had the advantage of being first in people’s minds when they are looking to purchase an electronic step-counter.

 

However, well-known brands are coming out with their own versions of Fitbit’s technology.  Step-counters are now commonplace in high-end, electronic watches like the Apple watch.

 

Some analysts still don’t believe Fitbit will be affected.

 

“Fitbit is our top pick in consumer electronics, and we expect new products and accessories to help drive a strong holiday season,” Morgan Stanley analyst Jerry Liu said in a research note last week. “Our distributor and reseller checks indicate demand is still strong, and Fitbit continues to dominate the competition.”

 

Liu notes that as Fitbit’s competition adds more of Fitbit’s technology in their own products, Fitbit is fighting back by reverse engineering competitor’s technology into their own.

 

Apple watch adds a step-counter? Fitbit adds a watch. Samsung Galaxy syncs steps to your phone? Fitbit syncs to a variety of free apps.

 

The Bad

Unfortunately for Fitbit, they are neither Apple nor Samsung.  As companies with stronger brand loyalty create more Fitbit like applications, those brand-loyal customers are going to those companies. Fitbit’s stock continues to slide in 2016.

 

Fitbit insists they’re fine and are promising to innovate.  They recently purchased Coin, a wearable payment platform, to remain competitive with the likes of Apple Pay.

 

While Apple Watches and Fitbits aren’t in direct competition yet, they are quickly on a collision course that finds Fitbit in a bit of a no-man’s-land.  Do they stick to their guns and focus solely on being a fitness counter? Do they ramp up their technology and try and crack into the smartwatch business? This is the situation Fitbit finds itself it, and this is the exact reason why analysts are split about them.

 

The Ugly

On the whole, investors aren’t too keen on Fitbit’s future, which is putting them at an early disadvantage. Stock prices have slipped, investment firms are giving them lower ratings, and sales estimates for the fall are being lowered.

 

But don’t count Fitbit out yet. The promise to innovate is a strong one, and it remains to be seen whether Fitbit can release a product akin to a smartwatch that may take them out of the doldrums of poor performance.

 

The future of Fitbit is uncertain, and the company has the ability to go either way. That’s why, for the next 12 months or so, Fitbit is truly a company to watch.

 

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