Here’s a bit of free advice to any Fitbit Inc (FIT) investors who’ve renewed their enthusiasm following Stifel’s reiterated bullishness on Fitbit stock … just because one analyst says it doesn’t make it true.
Indeed, given that Stifel made a point of maintaining a “buy” rating at the same time it cut its target price on FIT stock from $60 to $35 per share inarguably sends a mixed message. It also raises a philosophical question: Can a stock that’s deemed worth almost half of what it was worth a day ago still be rated the same as it was a day ago?
Either way, while one man’s opinion might be off-base, the collective opinion of several stock-pickers holds more water. Whether rational or not, if the whole chorus is singing the same tune about Fitbit stock, investors may not want to stand in the mob’s way.
Stifel Rethinks FIT Stock Value
In simplest terms, Stifel feels Fitbit stock has been unfairly beaten down since Jan. 5, when it unveiled a smartwatch called the Blaze aimed at the popular (and better established) smartwatch from Apple Inc. (AAPL). Viewing the new product as a waste of time and effort competing with Apple and/or as a sign that its fitness-tracking watches were already losing steam, FIT stock fell 18% that day.
Shares have fallen another 25% in the meantime, largely fueled by reports that the wrist-worn “PurePulse” sensors tracking a wearer’s heartbeat rate are alarmingly inaccurate.
Stifel analyst Jim Duffy was swayed enough to nearly cut his target price on Fitbit stock in half, though he still applauds the strong adoption rate of Fitbit’s product, suggesting FIT stock remains a “buy” even if the upside isn’t quite as high as it used to be now that FIT is well below last year’s peak levels … when Fitbit-mania was also at its peak.
“Market adoption of Fitbit products is pacing ahead of expectations, a pipeline of new offerings and software enhancements that expand the utility of the platform are poised to launch in 2016, and all aspects of our original bullish thesis remain valid.”
Were it just Stifel calling for a near-doubling of the current price of $17.91 for FIT, it would likely be dismissed as lunacy. As it turns out, however, the rest of the analyst community is just as bullish, even if they haven’t recently updated their calls.
Counting Jellybeans
It’s a favorite game at carnivals, church picnics and birthday parties — guess the number of jellybeans (or marbles, or buttons, or whatever) in the jar and win a prize.
Rarely does anyone guess with any meaningful accuracy, and even those with the closest guesses are usually still well off the actual number. But, it’s interesting that the average guess of everyone who played the game is very often amazingly close to the actual number of jellybeans in the jar.
In other words, a group is collectively smarter than any one single person in the group.
If the premise applies to the analyst community — and it does — Stifel’s optimism may not be as crazy as it seems on the surface. As of the latest look, the twenty analysts keeping tabs on Fitbit stock feel, on average, it’s worth $42 per share. Of those same twenty analysts, twelve deem it an outright “buy”… or whatever their particular firm’s most optimistic rating is.
Granted, Stifel’s new price target on FIT stock doesn’t seem to be factored in yet, although it doesn’t really matter; the average price target won’t be changing much once the adjustment is made.
Is it possible most of these analysts could be wrong? Sure. Anything’s possible. It’s just not likely this many professional stock handicappers could be this wrong in the same way.
Bottom Line for Fitbit Stock
Just for the record, yours truly here still sees a little too much GoPro Inc (GPRO) in Fitbit to be jazzed about FIT stock. That is, while most everyone acknowledges it’s a clever use of technology, the number of consumers who think a wearable activity tracker is clever enough to actually buy one is smaller than most people imagine. Never even mind the number of knockoffs that have surfaced in the meantime.
But my personal view on Fitbit is irrelevant. If the majority of analysts are all delivering the same (or at least a similar) message, sooner or later that paradigm is going to create a self-fulfilling prophecy and drive FIT stock to its expected levels.
In other words, the odd optimism Stifel reiterated of Fitbit stock today as it cut its price target nearly in half isn’t too difficult to swallow. Duffy has only mirrored what most other analysts have been saying of late … analysts who are collectively right more often than wrong.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
