Apple Inc. (AAPL) shipped 11.6 million watches last year, and 4.1 million during the fourth quarter. While good, sales of the Apple Watch have been somewhat disappointing, especially considering the scale of the company’s iPhone.
Furthermore, Apple has been unable to lead in a market that many thought it would completely dominate, with Fitbit Inc (FIT) still holding a 29.5% market share at the end of Q4 versus a 15% share for Apple after one year in the market.
Those who thought the Apple Watch and Android Wear’s launch would destroy Fitbit could not be more wrong, with Fitbit’s Q4 market share higher than its 26.9% share for the entire year. This suggests that Fitbit is gaining momentum against its competitors.
Ironically, Fitbit’s CEO James Park is telling investors how it has done the impossible — outperform the tech giants Alphabet Inc (GOOG, GOOGL) and Apple in wearables.
Park’s belief is that the Apple Watch and others like Samsung (SSNLF) do too much, and are too complicated. While you might think he’s completely out of touch with today’s consumer, Fitbit’s market share and the relatively disappointing performance from Apple and Samsung suggest he’s right, which bodes well for Fitbit stock.
Why Park Is Right About Fitbit
Tech giants like Apple and Alphabet are trying to make their smartwatches mirror their respective smartphones. These companies want to build out their app ecosystems for wearables, and thereby allow watches to do everything on a 38mm-to-42mm display that consumers do on a 4.7-inch-to-5.5-inch iPhone.
Unfortunately, it is not realistic that everyone who purchases an Apple Watch wants those capabilities, and by cramming all those features into a small wearable, it makes the device complicated. That’s essentially what Park is saying.
Just to be fair, the big takeaway from this year’s Mobile World Conference is that consumers wanted simplicity in their smartwatch, which means that Park is not alone in his analysis. Park goes on to say that competitors are not doing a good job at promoting their best features, or explaining to consumers “why” they need to purchase the product.
Fact is if the Apple Watch has no unique features that set it apart from the iPhone, then why buy it? Moreover, if the average consumer can’t figure out how to get from messaging to contacts and then back to the average clock, then Park is right, the devices are too difficult and lack a legitimate reason for ownership.
FIT Stock Is in a League of Its Own
What Park has done is emphasize fitness, health and style at an affordable price. That is what consumers seem to want, with this approach allowing Fitbit to completely dominate the wearables market last year. What’s most impressive is that FIT did so without any smart wearables.
Just recently FIT launched its first smart wearable with the Blaze, a device that was criticized by analysts for being too simple as a smartwatch. Yet, with a lower price point of $199, a continued emphasis on design, fitness and health, along with some new yet seemingly simple smart features like on-screen workouts that interact with the company’s leading iOS and Android app.
These are just a few of the features that seem too simple for the likes of Apple or Samsung, but are important and actually useful to those looking to purchase a smartwatch.
With that said, we already know that Fitbit is the dominant single player in basic wearables, but the Blaze is well on its way to causing havoc for Apple and Samsung, with one million shipments in its first month. As noted in a previous article, the higher price point coupled with superior growth in the smart segment versus basic wearables implies great days ahead for Fitbit stock.
You would not know that FIT is so dominant by looking at Fitbit stock, but it is, and while Park may seem out of touch, the more likely scenario is that he knows exactly what consumers want for their wrist, and that’s why the company continues to exceed all expectations.
As a result, it’s a good bet to assume that Fitbit’s strong performance in the wearables market will remain if not improve thanks to its newly found success in the smart wearables industry.
And that means FIT stock should follow the company’s lead.
As of this writing Brian Nichols owns shares of FIT stock.
