Fitbit Stock Isn’t Doomed, But It Sure Isn’t a “Buy” (FIT)

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Just when you think it can’t get any worse for Fitbit (FIT), it gets worse.

Fitbit Stock Isn't Doomed, But It Sure Isn't a "Buy" (FIT)After losing 27% of its value last week and closing at nearly 60% less than its peak price reached in August, Fitbit stock fell another 10% on Monday. FIT stock is now even below its June initial public offering price.

The wave of selling was spurred by a few too many red flags, and most recently a pair of lawsuits levied against the company.

In the grand scheme of things, however, none of this can be surprising to anyone who’s been trading for a while and has watched the hype cycle run its course often enough.

It’s Just a Watch

In retrospect, the rise and fall of Fitbit stock parallels that of GoPro (GPRO) — the once red-hot maker of action cameras the market went wild over (the product as well as the stock) because its cameras scored very high on the “cool” scale, but ended up not scoring very high on the “cool enough to spend a couple-hundred bucks on” for many consumers beyond the initial wave of buyers.

Giving credit where it’s due, Dan Burrows summed it up perfectly back on Dec. 4, explaining “It’s a camera, people.”

His point? It’s not a game-changer the way the iPhone from Apple (AAPL) was. The Hero camera and all the other action camera iterations from GoPro are very cool and very functional, but when it comes right down to brass tacks, it’s not like the company broke new ground.

Anybody can re-create the action camera, and more than enough companies have made a dent in GoPro’s sales, sales that were always going to be muted simply because most consumers just don’t care.

Now FitBit is halfway down that same path, for parallel reasons, but with the added reason that its fitness-tracking watches may simply not work as well as they should.

Headwinds Are Brewing

The company said it all in its public response to a lawsuit claiming its heart-beat monitors were dangerously inaccurate:

“But it’s also important to note that Fitbit trackers are designed to provide meaningful data to our users to help them reach their health and fitness goals, and are not intended to be scientific or medical devices.”

A wrist-worn heart rate monitor isn’t intended to be a medical device? OK, it’s not as if anyone was expecting hospital-caliber equipment sold on the shelves at the nearest discount retailer. On the flipside, yes, the PurePulse tracker was largely sold as a medical device of sorts. If it’s not even that, then what’s the point?

The lawsuit is collectively being filed by consumers who feel they were duped into buying a Fitbit device based on the company’s claims. In the meantime, a class action lawsuit is taking shape to vindicate owners of Fitbit stock who feel they’ve been wronged by the fact that the company put a flawed product on store shelves.

Oh, and by the way, competition is starting to mount, much like it did for GoPro. Under Armour (UA) unveiled a health-tech wearable lineup last week, while the Moto 360 does effectively does the same as most FitBit watches. And that’s just the beginning of the list of other players that offer alternatives that may well work better.

But the new Blaze, which tiptoes further into the full-on smartwatch territory Apple currently dominates. The Motley Fool’s Andrew Tonner made a valid point this past weekend on the matter — anyone mulling a Blaze is likely to see the Apple watch as a much more functional holistic solution.

And yes, Fitbit is already losing market share, from 33% of the wearable market in the third quarter of 2014 to 22% of the wearable market as of the third quarter of last year.

It’s the summation of all these headwinds sending the Fitbit stock price seriously lower. Problem: There’s no meaningful response to any of them that does investors much good.

Bottom Line for Fitbit Stock

None of this is a prediction of the end of Fitbit as we know it. It is a warning, however, that until Fitbit figures out how to deal with the fact that it’s nothing particularly special right now, Fitbit stock is going to struggle. This is one dip that may not be a setup for a quick, sharp rebound.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/fitbit-stock-fit-price/.

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