How Likely Is a Fitbit Short Squeeze?FIT) may not have performed well over the last few months, but a strong moat from Fitbit surrounding the technology ecosystem of products now exists and is swiftly growing. As a matter of fact, the technology obstacle for wearables has developed to become increasingly arduous for companies not good enough to introduce a new product and accomplish substantial market share.
It is well known to everyone that wearables are at their infant stage of deployment, but for numerous companies, the defensible technology moat formerly exists and it is mounting quickly.
A moat subsists in the wearables market as numerous major companies have tried to grasp a strong position in the market with either inadequate success or something similar to fiasco on their preliminary efforts.
According to a report from IDC, Fitbit accounted for the leading position in the wearable market, but can change in the nearby future as various kinds of new products are being introduced and achieving propulsion. It is highly probable that the Gartner and IDC will make future sub-types for wearables to comprise the advent of headsets, clothing wearables, and smart glasses.
The rate of improvement at Fitbit may hasten as it has been pumping up its R&D expenditures. According to the most recent quarterly result, around 1000 company employees are now intricate in the R&D section. Apart from this, Fitbit is even tracing engineering ability from Eastern Europe into its Minsk office.
With time, the rising archive of Fitbit's patents is expected to speed up, which in addition to the recent ramping up of the R&D may provide positive outcomes. Future innovations may involve sensors that specify stress, blood pressure, hydration, and blood glucose levels, etc.
The major advantage for Fitbit is that the company’s products relish the worldwide scope of customer and corporate approval, which no other wearable device has accomplished.
Although Fitbit's stock is beaten down, I think it is set up for a potential short squeeze. Fitbit's earnings are around the corner and with all the bad news already priced in the stock, I think investors can consider trading Fitbit heading into earnings.
In the long-term, Fitbit's future is still unclear, however, the company does have an early mover advantage and its growing R&D expenses will certainly help it fortify its dominance.
Published on Apr 22, 2016By Prudent Investor