Fitbit Inc (FIT) started 2016 in a slump, with Apple Inc. (AAPL) and its Apple Watch rapidly gaining market share, while China’s Xiaomi continues to gain ground by selling cheap fitness trackers.
Fitbit just announced another new wearable product for its lineup, the Fitbit Alta. Unfortunately, like the previously announced Blaze, news of the Fitbit Alta failed to ignite FIT stock.
State of the Market for FIT Stock
2015 was a challenging year for Fitbit and 2016 isn’t starting out the way it had hoped.
The company remains the leader in the fast-growing wearables market and no one disputes the fact that it makes some of the finest activity trackers around. Well, some Fitbit users aren’t too pleased with the heart rate monitors in its products, but Fitbit gear is generally highly rated by people who want to track their daily fitness and sleep stats.
However, when the Apple Watch was released in early 2015, its combination of activity tracking credibility, smart capabilities and style quickly propelled Apple into second place in the wearables market and it came close to catching Fitbit, with 18.6% of the market in the third quarter of 2015, compared to 22.2% for Fitbit.
Adding to Fitbit’s worries, Xiaomi posted crazy 815% growth in the same period by selling inexpensive fitness trackers like the 30-day battery life, $15 Mi Band. With 17.4% market share, Xiaomi is also within striking distance of Fitbit.
Meanwhile Fitbit went through all of 2015 without releasing a new wearable to take on the Apple Watch or the Mi Band. FIT stock dropped steadily from a high near $52 in August to close out the year in the $30 range.
The announcement of the Fitbit Blaze at the 2016 Consumer Electronic Show was supposed to turn things around for Fitbit, with a new smartwatch-inspired wearable with fashionable, interchangeable bands and frames. That didn’t go as planned, with FIT stock dropping over 10% after the announcement.
Today, another new wearable was unveiled: the Fitbit Alta.
Rather than gunning for smartwatch shoppers like the Blaze does, the $129.95 Alta is a simple, bracelet-style wearable that tracks activity basics, while displaying call and text notifications from a paired smartphone. Where the Fitbit Alta follows in the footsteps of the Blaze, though, is with its clear targeting of the fashion-conscious crowd.
The company is offering “Luxe Collection” and “Classic Collection” accessories for the Fitbit Alta, including a $99.95 metal bracelet, along with $79.95 pink and graphite leather bands.
Even the tagline for the Fitbit Alta conveys the message that this is a device that’s about fashion as much as it is about fitness tracking: “Motivation is your best accessory with this fitness wristband.”
Good News for Fitbit?
The market reaction to the Fitbit Alta hasn’t been as bad as the Blaze fiasco, but the sound of crickets — FIT stock was down slightly Wednesday from where it was before the announcement — isn’t much of an improvement.
Clearly Fitbit is not going to go after Xiaomi. Selling $15 fitness trackers is not the sort of business it wants to be in. But the Apple is worrisome and despite Fitbit’s attempts to brush off the Apple Watch as not really being a competing device, the fact remains that Apple’s wearable is pulling off the fashion accessory/smartwatch/fitness tracker juggling act fairly well.
With the Blaze and now the Alta, it looks as though Fitbit’s strategy for 2016 is to leave its core demographic of serious fitness tracking enthusiasts with the older Surge and Charge HR trackers. New product development (at least to this point) seems focused less on hardcore fitness buffs and more on the people who buy a wearable as a fashion accessory that happens to offer some activity tracking capabilities.
In other words, Fitbit is focused on trying to prevent the Apple Watch from taking the wearable crown by trying to play Apple’s game.
This is a significant shift for Fitbit and it’s not without risk. Its core demographic is bound to get tired of waiting for new, more capable devices. While the new Fitbit Alta is affordable and stylish, it lacks a heart rate sensor so traditional Fitbit fans might pass it by. When it’s dressed up with the optional metal bracelet, it becomes a $230 device, putting it at nearly the same price as options like Microsoft Corporation’s (MSFT) much more capable Band wearable and little more than $100 from an Apple Watch and its full-blown smartwatch cred.
If Fitbit got it right and the key to selling more wearables in 2016 is to focus on style as much as substance, then FIT stock may yet recover. If not, the slide — it’s now down over 17% from its June 2015 IPO — is likely to continue.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
