As of yesterday, there’s a new superteam in town: e-commerce giant Amazon.com, Inc. (AMZN) and wearable fitness devices company Fitbit Inc (FIT) have teamed up in a new high-tech collaboration that could potentially help bring FIT stock out of its slump.
Fitbit is essentially a Wall Street newborn, with its shares debuting on public markets about nine months ago. Except, unlike a real baby, which goes through an incredible metamorphosis in the womb, Fitbit stock has languished. Shares are down 51% since its opening-day close at $29.68.
Frustratingly, Fitbit’s financial performance has actually been exceptional, making its downward spiral all the more confusing. Despite three straight quarterly beats on revenue and earnings per share, Wall Street always seems to find something to dislike about Fitbit.
But I truly believe that if Fitbit continues to blow the top off expectations, traders, portfolio managers and individual investors alike will be forced to reward FIT stock for its execution. And the latest partnership with AMZN could help take execution to a new level.
Amazon’s Alexa Now Compatible With Fitbit
Alexa, Amazon’s AI personal assistant that comes standard in products like the Amazon Echo and Amazon Echo Dot, will now be able to spout encouragement to Fitbit users.
Ask Alexa how many steps you’ve taken today, or any day this week, and it’ll tell you, and remind you how many more you need to hit your goal. Fitbit Executive Vice President of Interactive Tim Roberts explains that the new hands-free feature would allow users to get their step count as soon as they get home from work, letting them know if they need to take a walk before dinner.
AMZN notes that there are millions of Alexa-enabled devices already in the hands of consumers, and with 16.9 million users of Fitbit’s mobile app, the overlap between the two groups could be surprisingly large, which is great news for FIT stock.
After all, while Fitbit’s app is great at tracking and presenting data, a voice feedback feature brings a whole new level of motivation to the equation. Get a load of what Alexa can do in this regard:
“This new Alexa skill will also offer words of encouragement to inspire users to meet their daily and weekly goals, and responses will even be tailored to the specific time of day. For example, if you inquire about your step count at 9 a.m., you might be reminded that ‘you’ve got to start somewhere,’ or encouraged to ‘try to take a walk today, but don’t forget to stop and smell the roses.’”
I truly think this will both boost engagement with AMZN’s Alexa and reinforce to Fitbit users the utility of their products. On top of that, it’s just a pretty cool, futuristic integration that will doubtlessly get some word-of-mouth advertising in — which should be a positive for FIT stock.
Fitbit is also courting high-tech users, who, although they make up a relatively small percentage of the population, account for more than their fair share of sales. Early tech adopters can help make or break a new product at the outset with their reviews.
With BofA/Merrill Lynch’s recent note suggesting the company’s most recent product, the Fitbit Blaze, is off to a burning hot start, FIT stock looks dramatically undervalued, especially after the AMZN news. It trades at a forward price-to-earnings ratio of just 10, and at a P/E-to-growth ratio of 0.6, suggesting its P/E ratio is just 60% of projected future growth levels.
Normally, a PEG ratio below 1 is seen as providing huge value, so Fitbit stock’s 0.6 ratio is an insanely favorable metric.
The Amazon Alexa integration isn’t Fitbit’s first time syncing with a virtual assistant, as it also boasts “voice activated food and activity logging” through Microsoft Corporation‘s (MSFT) Cortana.
But with the growing popularity of the Amazon Echo becoming hard to ignore, it may be only a matter of time before FIT stock itself becomes hard to ignore — and this baby finally starts to grow.
As of this writing, John Divine was long FIT and AMZN. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
