Financiers Bullish on Fitbit

November 10, 2015 Gillian Christie

On November 2, Fitbit (NYSE: FIT) disclosed its third-quarter earnings for 2015. The wearables company posted exceptional revenue growth – a rise of 168% year on year from $152.9 to $409.3 million – that smashed analysts’ expectations. During the third quarter, Fitbit sold more than 4.8 million devices, an increase from 4.5 million sold in Q2.

Despite Fitbit’s outstanding growth, its stock price slipped by as much as 9% in the trading hours following the disclosure. The company indicated that they would sell an additional 7 million shares, with certain shareholders selling 14 million shares. More than 20 million Fitbit shares will soon flood the market.

When asked about the Apple Watch, Fitbit’s CEO, James Park, noted that the rollout of other smartwatches had not impacted the company’s growth, and that the Apple Watch had “no material impact” on Fitbit’s earnings. This is because the two companies target different market segments in terms of price point and use. Fitbit’s prices range from $60 to $250, while the Apple Watch starts at $349.

Fitbit’s earnings report supports research by Morgan Stanley, who are bullish on the company. Fitbit already boasts 30 of the Fortune 500 companies as clients, and is ramping up its enterprise salesforce to take advantage of more employers integrating and subsidizing wearables into health programs. Gartner further predicts that 2 million employees will wear health and fitness trackers as a condition of employment by 2018. According to Morgan Stanley, Fitbit is already undertaking studies to demonstrate relationships between activity and reductions in healthcare expenses to capitalize on this market.

According to Morgan Stanley, potential risks for Fitbit include the stalling of wearable growth, or that other competitors like Apple and Samsung gain market share as they introduce new products. The never ending battles between Fitbit and Jawbone that could become a distraction for both companies, while privacy concerns among consumers of personalized health technologies, including wearables, could further hamper Fitbit’s strong market standing.

What do you think is the future of the wearables market? Where do you see Fitbit and others heading within the next year? We are interested to hear from you! Tweet at Vitality @VitalityUSA or Gillian @gchristie34.

Thumbnail Credit: Bidness Etc

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