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Fitbit (FIT) Rides on Innovation, Rising Competition a Woe

Zacks

On Jul 12, we issued an updated research report on Fitbit Inc. FIT.

While we are encouraged by the company’s efforts to shift its focus toward healthcare and fitness on diversification of product portfolio, increasing competition and lack of upgrades among existing users raise concerns.

Growth Drivers

The company has been introducing new products to increase revenue base. Yet, these products are unable to drive enough revenues for the company. However, its efforts to further diversify business, and focus on health and wellness could help the company drive revenues in the near future. Just recently, it came up with its first wearable for children, namely Fitbit Ace. This device is aimed at children of eight years and older.


Technology firm Fitbit is undertaking other initiatives that are expected to pull out the company from slow growth. These steps include offering a streamlined set of products, improving software and services to offer more personalization to customers, and achieving greater integration into the healthcare ecosystem.

Positive Earnings Surprise History: Fitbit has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive earnings surprise of 42.78%.

Headwinds

Notably, Fitbit has underperformed the industry over the past year. Shares of the company have gained 16.9% compared with the industry’s growth of nearly 39.2%.

Fitbit, which became a prominent name for simple fitness wearables, has been hurt by massive competition in the market. It faces competition in both the high and low-end product range. On the high-end front, it competes with Apple Watch. Although Fitbit expected Ionic to help the company take on Apple, it is hardly an easy task to compete with one of the biggest companies in the world. On the lower end, fitness-tracking devices from Jawbone, Garmin Ltd. (GRMN) and Xiaomi also pose tough competition.

Fitbit, Inc. Price and Consensus

Fitbit, Inc. Price and Consensus | Fitbit, Inc. Quote

Zacks Rank & Stocks to Consider

Currently, Fitbit carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Groupon GRPN, IAC/InterActiveCorp IAC and Ctrip.com International, Ltd. CTRP. While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Ctrip.com holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Groupon, IAC/InterActiveCorp and Ctrip.com is currently projected to be 6.5%, 7.5% and 16%, respectively.

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