Take Advantage of a Misunderstood Fitbit Inc (FIT) Stock

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Fitbit Inc (NYSE:FIT) investors declared in a unified voice back in early November: Enough is enough. FIT stock collapsed 30% after the company’s fourth-quarter and full fiscal year guidance fell well below analyst expectations. Game over, Fitbit is done.

Take Advantage of a Misunderstood Fitbit Inc (FIT) Stock

Based on the reaction of FIT stock, the wearable fad is all but dead … or Apple Inc. (NASDAQ:AAPL) is eating Fitbit’s lunch with its newly improved Apple Watch. This, however, couldn’t be further from the truth as Fitbit likely proved naysayers wrong during the holiday shopping season.

Yet FIT stock is currently trading within striking distance of its all-time lows of $7.20, so investors should take advantage of the stock’s weakness.

The Wearables Market Is Still Growing

There is no doubt that the wearable market isn’t as hot as it was just a few years ago, but that doesn’t mean the market isn’t growing.

According to IDC’s data, which was released on Dec. 5, the wearables segment grew 3.1% year-over-year in the third quarter of 2016. By comparison, the global smartphone market grew 1.1% year-over-year over the same time period.

IDC added that Fitbit is the clear winner, as it shipped 5.3 million units in Q3, up from 4.8 million in the same quarter a year ago. The company also boosted its market share to 23% from 21.4% a year ago.

By comparison, Apple was ranked fourth, having shipped 1.1 million Apple Watch units in the third quarter, down from 3.9 million a year ago. This contributed to Apple’s share in the wearable market plunging from 17.5% a year ago to 4.9%.

IDC also suggested that Fitbit will “continue leading the pack in the near term” and the industry as a whole has been “down in recent quarters, but clearly not out.” Does this sound reflective of a stock that is down 60% over the past year?

FIT Stock: The Holiday 2016 Winner

The ultra-important 2016 holiday shopping season has come and gone. Investors are forgiven to be working under the assumption that overall sales were a complete disaster, at least based on Kohl’s Corporation (NYSE:KSS) and Macy’s Inc (NYSE:M) dismal holiday sales figures.

However, First Data reported on Jan. 9 an industry-wide breakdown of what consumers were buying, and it bodes very well for Fitbit stock. Sales of health and personal devices rose 5.6% during the holiday season, marking an acceleration from last year’s 2.4% growth.

For those who want to nitpick and argue that Fitbit is more of an electronics company then the sales data is even more encouraging. Sales of electronics rose 8.5% during the holiday season, marking a complete reversal from last year’s 2.2% decline.

Need some more encouraging signs that the holiday season was likely very successful?  

How about this — aside from “Super Mario Run,” no other app was more downloaded on Apple’s iPhone app store. Yes, this means that iPhone users are shunning the Apple Watch in favor of a Fitbit device — for the second straight year.

Overbeat And Underappreciated?

No one is saying FIT stock will recover all of 2016’s losses but the argument can be made that FIT stock has been beaten up so much that investor expectations are so poor.  

It is however likely that Fitbit’s growth story is underappreciated and even the slightest beat would rejuvenate the stock. The question is will investors buy shares before the company confirms in its next earnings report what third-party data is already showing us today?

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


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/fitbit-inc-fit-stock-misunderstood/.

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