Why Fitbit Is Still Not a Good InvestmentFIT) has often been touted as the next GoPro (GPRO) and the stock’s performance has lived up to that reputation. Despite the recent weakness, Fitbit may have more room to fall in the coming quarters, which is why I think investors should avoid the stock at current levels.
Apple Watch OS3
Fitbit is the leader of the fitness tracking device industry. But, the company has been badly hurt this year mainly due to the concerns outstretched regarding the correctness of its heart rate-tracking technology. This also has been a problem for several other players in the industry.
Recently, Apple publicized enhancements for its Apple Watch operating system known as OS3, which will feature a fitness app that will compete against Fitbit’s fitness app.
The company’s product line-up mostly includes dedicated health and fitness trackers aiming the lower end of the market while Apple conquers the high end of the smartwatch market. However, product trails of both the companies suggest that Apple and Fitbit will progressively go head to head.
To elude price based competition and attrition problems, Fitbit is adding new features to better assimilate its products into consumer’s lives and create a product-customer bond which aids imminent product upgrades. This clearly means charging greater prices and approaching in the direction of the smartwatch segment where massive players such as Samsung and Apple are formerly being established.
Apple is gradually enhancing the Watch’s health and fitness component to better differentiate its smartwatch from the iPhone, and is also anticipated to take pricing of the Watch further cheap as it traditionally lowers prices of older models of its products.
All in all, the fitness tracking industry is becoming crowded with time, as many small and huge players are entering into the industry. Due to this, the company is being forced to spend aggressively on marketing and launching new products while also keeping its prices in range.
On the other hand, Fitbit anticipates strong revenue growth this year, but the same is not the case in terms of earnings. Fitbit expects a profit in the range of $0.08-$0.11 per share this year, slightly less than half of the $0.26 per share predicted by the Wall Street analysts.
Increasing competition has definitely taken a toll on Fitbit and this trend should magnify going forward. Fitbit still stands a chance against giants like Apple, Garmin, etc. and will also struggle against new comers like Under Armour (UA), making the stock a sell at current levels.
Published on Jul 18, 2016By Akshansh Gandhi