Fitbit Inc (NYSE:FIT) announced a pretty big deal today. The former wearables champion secured a three-year deal with the Minnesota Timberwolves to be the “official wearable” and “official sleep tracker” of the NBA team. Those are some pretty bizarre titles, and the market seems to think the deal is just noise in an otherwise downward trajectory for FIT stock.
In fact, over the past 5 days, Fitbit stock is down 2.7%.
I don’t always agree with Mr. Market, but I think he’s got it right on this one: Sell FIT stock and don’t look back.
Here’s why.
Too Little, Too Late for Fitbit Stock
The writing has been on the wall for FIT stock for some time. The wearables market has simply matured from basic activity trackers to advanced smart watches. Much like the smartphone market, as the wearables market matures, competition gets squeezed out, and only the powerful few survive.
Unfortunately for investors, Fitbit is not one of the powerful few. Those spots seem to be reserved for Apple Inc. (NASDAQ:AAPL), Garmin Ltd. (NASDAQ:GRMN), LG Electronics (OTCMKTS:LGEAF) and Samsung (OTCMKTS:SSNLF).
Also unfortunate for FIT stock investors, the Timberwolves deal doesn’t change much. It’s certainly a positive that an NBA organization believes in the Fitbit product line, but that’s little evidence to imply an inflection point.
The “jersey patch” thing in the NBA is a brand new phenomena. NBA teams were just recently allowed to feature companies on their jerseys, somewhat like jersey advertisements. It’s another way for the NBA to generate more ad money. Pretty much all the teams are signing deals, and none of them really mean much of anything at this point in time.
The Cleveland Cavaliers signed a deal with Goodyear Tire & Rubber Co (NASDAQ:GT). The Boston Celtics inked a deal with General Electric Company (NYSE:GE). The Sacramento Kings will wear Blue Diamond jersey patches next year, and the Philadelphia 76ers will wear StubHub jersey patches.
The list goes on and on.
Its simply far too early in the jersey patch phenomena to read much of anything into the deal. Fitbit stock will benefit from increased exposure, but it’s the Timberwolves, not the Warriors, so the exposure tailwind is limited at best. Maybe this is the beginning of greater Fitbit integration into the professional sports world, but the jersey patch deals include tire companies and food companies.
At this point in time, it’s unwise for investors to glean much of anything positive from this deal. It certainly feels like too little, too late for the stock.
Bottom-Line on FIT Stock
I’ve been bearish on the stock for a while. Even though Fitbit stock continues to fall to new lows, I remain bearish.
The NBA deal is interesting, but nothing more than that. It’s hard to imagine it has much of a financial impact, and it’s equally hard to imagine FIT stabilizing its financial performance as competition continues to heat up.
Investors should continue to stay away from this name. Much like GoPro Inc (NASDAQ:GPRO), consumers and investors have fallen out of love with Fitbit. That means that also much like GPRO stock, FIT stock is at best range-bound at these depressed levels.
As of this writing, Luke Lango was long GRMN.
