IDC Data Looks Rosy for Fitbit Stock and the Wearables Market (FIT)

IDC released its latest outlook for wearables, and this updated report is even more bullish than the last.

IDC Data Looks Rosy for Fitbit Stock & The Wearables Market (FIT)

Source: Fitbit

While smart wearables will, unsurprisingly, carry the bulk of this growth, what IDC expects from basic wearables is sure to have an impact on the Fitbit (FIT) stock price long-term.

What Does IDC Expect?

According to IDC’s latest estimates, total wearables shipped should total 76.1 million by the end of this year. By 2019, that number should rise to 173.4 million.

While these numbers would apparently look great for Fitbit stock, most of this growth will occur in the smart wearables market.

Last year, smart wearables — those like the Apple (AAPL) Watch — accounted for 17.7% of all wearables shipped. This year, smart wearables will total 31.3% of all shipments, and by 2019, that number will rise to 49.1%.

Basic wearables may be losing market share, but because of the industry’s expected growth, these devices will also grow in year-to-year total shipments. IDC’s outlook suggests the following shipment totals for basic wearables.

Year Basic Wearables Market Share Implied Units Shipped
2014 81.9% 23.67 million
2015 68.5% 52.12 million
2019 43.6% 75.6 million

While growth for basic wearables will slow significantly after 2015, investors must remember that regular wristwatches are also counted in this category. That is an industry with very little growth.

More than likely, Fitbit is driving much of the growth for the basic wearables market. During FIT’s last quarter, its total shipments jumped to 4.5 million, up from 1.7 million in the same period last year.

In other words, FIT is contributing significantly to the growth that’s been created in the basic wearables market.

Wearables Growing Faster Than We Thought

Fitbit’s stock price fell by double digits after it reported second-quarter earnings in August, implying poor performance by the company. In reality, FIT had an exceptional quarter, one that blew past analyst expectations.

The company grew revenue 250% to $400 million, a whopping $80 million better than analyst expectations. Further, its guidance for revenue of $1.65 billion is $250 million better than analysts expected for the full year, representing year-over-year growth of 120%.

Therefore, FIT does have a lot to do with how the basic wearables market is performing, but more importantly is the fact that sales in this industry are growing much faster than anyone expected.

For example, IDC had issued an outlook for the wearables market back in June, about four months ago. Take a look at how IDC’s outlook differs from June until October in terms of expectations.

June outlook
October outlook
72.1 million 76.1 million
2019 155.7 million 173.4 million

For IDC’s outlook to change by such a drastic degree in just four months’ time suggests the wearables market is a great place to invest.

Fitbit Stock In a Great Position

FIT not only owns the number one fitness app on iOS but also 85% of the U.S. connected activity tracker market for wearable devices according to NPD Group.

Therefore, FIT is the go-to supplier of fitness-related wearables, having a niche market that is growing fast.

With Fitbit stock losing one-third of its value from its high, it looks like now is a good time to buy and go long FIT stock.

As of this writing, Brian Nichols owned shares of FIT.

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