Why Fitbit Inc (NYSE:FIT) Stock Can Still Reach $15 This Year!

- January 31, 2017

Here recently, I have insisted that Fitbit Inc (NYSE:FIT) is a good long-term investment. Many might say I was wrong, especially after Fitbit’s job cuts, slashed guidance, and a 16% drop in FIT stock. Altogether, Fitbit stock has fallen more than 80% since its IPO, and that was in June 2015.

Fact is there are not many stocks to have fallen like FIT. In fact, the only stock to have lost equal value in the same span is GoPro Inc (NASDAQ:GPRO). Ironically, these massive losses coupled with what Fitbit CEO James Park recently disclosed, is why I still think FIT stock will see $15/share by the end of 2017, or very close to it.

Events to push Fitbit stock higher

PicsArt_01-30-06.39.12Just to be clear, I am not one of those delusional Fitbit stock owners who have owned it throughout the complete ass kicking it has endured, and refuse to accept defeat or admit I was wrong. Yes, I do own FIT stock in the BNL Portfolio, and yes I am down on that investment. However, as BNL Members know, Fitbit stock is less than 1% of the BNL Portfolio, not a large enough stake to reflect high conviction or make a real difference. If anything, my ownership is more so I don’t forget about it, waiting for events that I expect to play out.

Fact is I called Fitbit management arrogant and overconfident back in September of last year, and said that their mentality would “hurt FIT stock owners”. Fitbit stock was around $16 at the time. Regardless, let me expand on these “events I expect to take place”.

I have always been impressed with how Fitbit has successfully fought off big tech, and despite competition from tech juggernauts with superior ecosystems, its Blaze and basic wearable sales earned the company a top ranking among competitors with market share. Still, the company has failed and Fitbit stock has crashed because it is yet to develop a recurring revenue stream and relies too much on new product sales, a product refresh cycles.

The Fitbit Blaze was a smash hit, and it has now been a year since the product was launched. Therefore, it is no surprise that Fitbit cut guidance in half. It has not launched a meaningful product since Q1 of last year. However, the bar and expectations have never been lower. If Fitbit can introduce a high-end smartwatch this year, or perhaps two, there is no reason it can not clear low expectations, and send an oversold, highly shorted FIT stock higher

FIT stock: Looking ahead

CEO James Park says to expect “a temporary slowdown and transition period, before a planned product expansion into the higher-end smartwatch category. Park says this will “bring stabilization in the second half of the year.”

Park’s timeline is what makes me think Fitbit stock still has a great opportunity to soar in the back-half of 2017. As explained in previous articles, Fitbit has great brand power with consumers, and it is currently building brand power with corporations who want to leverage the billions of data points collected from Fitbit devices. This, coupled with recent acquisitions is why I think Fitbit is building a superior operating system and will finally produce a business with recurring revenue.

Fitbit’s current valuation of just $1.1 billion is less than twice the company’s cash. In other words, Fitbit trades at roughly $500 million minus cash. Thus, there is not a lot of downside left in Fitbit stock, and I trust that Park will launch several new smartwatch devices in the back-half of 2017, and capture a chunk of the $10 billion global smartwatch market. Because say what you want about Park and FIT stock, but this is the same company that grew annual revenue from under $100 million to over $3 billion in just four years.

After its latest outlook, expectations are very low, FIT stock is very cheap, and if Fitbit can produce a few more Blaze-like products, there is no question that sentiment will change and Fitbit stock will soar. It’ll take some time, and I am not willing to increase my very small stake in the company. However, I am also very optimistic that once smartwatch release dates start rolling out, FIT stock gains won’t be far behind.


This entry was posted in Members, Retail, Timely Analysis Bookmark the permalink.
RSS feed for this post. Post a comment or leave a trackback: Trackback URL.

Post a Comment

You must be logged in to post a comment.

Join the 100s Who Beat the Market with a BNL Membership

See What Current Members Are Saying

My Complete Access BNL Membership Includes

  • No contract. Guaranteed results. Cancel anytime.
  • Unrivaled Performance. The BNL Portfolio has outperformed the S&P 500 by 150% since October 1, 2015
  • Access. You know what goes in the BNL Portfolio, David’s Dividend Portfolio, and Eddy’s Options.
  • Alerts. You know when a trade is made in all three managed portfolios with application, text, and email alerts
  • Transparency. Verifiable trade records for the BNL Portfolio, David’s Dividends, & Eddy’s Options
  • Research. We have coverage on more than 50 companies
  • Results. Our 10 highest rated stocks outperformed the market by 134% last year
  • Live Chat. Join 100s of other members in an exclusive Members Only section with Chat
  • Growth. We are the fastest growing financial research platform in our industry.
  • Build My Portfolio. You give us your goals, we help you get there
  • Premium Content. Unlock hidden sections in each article. You also get Value of the Month selections and BNL Research Reports.
  • Community. We have professionals and beginners; retirees and college students; the 99% & 1%, but here, we are all equal.

Like what you see? Sign up for our newsletter and get the latest stock picks straight to your email!