Growing Competition Will Hurt Fitbit

Wearables tech market is getting crowded at a breakneck pace as many big and small companies are entering this space with different and effective products. However, Fitbit (FIT), Apple (AAPL), Garmin (GRMN), and Under Armour (UA) are some of the significant and well established companies in the industry and will likely have a dominating position for a long period.

At present, Fitbit is leading in the wearables tech segment and the company’s growth throughout the past few years has been really exciting.
The company’s sales surpassed $1.8 billion last year. However, wearables technology has grown rapidly in the past few years, but investors needs to think about the situation after five years from now.

With time, many companies are offering innovative and cheap fitness trackers to consumers, and it will definitely create problems for Fitbit in the imminent years. Moreover, Fitbit has been hit by several class action lawsuits. For instance, in 2014, some customers claimed that its Fitbit Force cause problems like skin rashes. To overcome that problem, the company replaced Fitbit Force with the Charge that was similar to Fitbit Force, but was manufactured using different material.

And recently, the company got hit by class action lawsuit claiming that the heart rate monitoring features in the Charge HR and Surge were incorrect by a considerable margin. Moreover, it was also found that the heart rate measured from Fitbit’s devices were 20 beats more equated to the rate measured by other heart rate monitors.

Apart from these, tech giant Apple is planning to launch a smartwatch that will focus on mainstream market. However, Apple recently publicized enhancements to its Apple Watch operating system named OS3, which will feature a fitness application contrary to Fitbit’s fitness apps.

It will also comprise of features that will allow the users to share activity data between other watch users, and soon the watch will be upgraded in such a way that it will track activity levels for wheelchair users. This is a significant move by Apple, and could hurt Fitbit in many ways.


All in all, Fitbit’s position as the industry-leader may not last for a long time due to the rapidly growing competition in the space. Although Fitbit is still recording strong growth, investors should be cautious as Fitbit could end up like GoPro (GPRO) in the long run. As a result, I think investors wanting to benefit from the wearables industry should rather look at stocks like Under Armour.
Published on Jun 22, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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