These are dark days for fitness tracking company Fitbit Inc (NYSE:FIT). Fitbit stock has been following a downward trajectory for the last two years and with the stock trading at just under $6 per share, things aren’t looking great.
Sure, the company’s activity trackers are still garnering some interest from consumers and yes, the company is doing its best to continue expanding, but it’s only a matter of time before investors give up on FIT stock completely.
I love to buy an underdog stock. There is nothing better than buying a stock with a price-to-earnings ratio that has taken a hammering due to market overreaction, but unfortunately for Fitbit stock, this is not the case. FIT stock is low for a reason — the firm has a weak core business model that simply can’t hold up against stiff competition in the years to come.
While some investors are still willing to bet on Fitbit stock, I’d argue that such a move is a terrible idea, and here are three reasons why.
FIT Stock: Lacking Diversity
Fitbit sells fitness trackers — period, end of story. The company’s promises to diversify by creating an app ecosystem that will tie in with Fitstar and Fitbit premium are weak at best. The firm is behind when it comes to these kinds of memberships and companies like Garmin Ltd. (NASDAQ:GRMN) and Android are already miles ahead with much more established app stores that connect to their own devices in this sector.
FIT stock bulls point to the fact that the company reported a 37% rise in active users at the end of 2016 as proof that the firm is in fact growing its digital offerings. However, Fitbit management has also said that revenue from its subscription-based services contributed less than 1% to its top line. That’s not nearly enough to be considered a viable way for the company to turn itself around.
Fitbit: New Products Aren’t Enough
When Fitbit first came on the scene, the company was offering a unique product that people were excited about. However, worries about accuracy coupled with an increasingly crowded wearables market has taken much of the shine off of FIT’s products.
In 2016, Fitbit attempted to make a place for itself in the smartwatch space with Blaze, but the product fell flat as consumers failed to see the value in a watch that did far less than Apple Inc.’s (NASDAQ:AAPL) watch, but carried a very similar price tag.
This year, FIT is going back to what it does best with a new updated fitness tracker called the Fitbit Alta HR. The new model is supposed to have superior technology to track things like heart rate and sleep within a more streamlined device, but it remains to be seen whether it will be enough to draw consumers back in.
While the new gadget claims to have all the bells and whistles, at its core, its not much different than FIT’s other products. Nor does it boast much of an advantage over other competitors’ wearables.