Is it any wonder that many tech companies don’t want to go public? Just look at the situation with Fitbit Inc (FIT), which is the top operator in the fitness wearables space. About a year ago, the company pulled off its offering, with Fitbit stock quickly shooting up from $20 to $52.
But of course, the good times would be short-lived. Because of some dicey quarterly reports, FIT has crashed back to earth, hitting as low as $12 a couple months ago.
But then again, might there be a value opportunity here? Or should investors still be guarded with Fitbit stock?
Well, first of all, not all the news is bad.
The fact is that the recent offerings from FIT have been getting lots of traction. During the first month of the launch of the Blaze smart fitness watch and the Alta fitness wristband, there have been shipments of over 1 million for each. And, more importantly, it appears that this is not temporary.
Keep in mind that Fitbit has continued to fetch No. 1 rankings on Amazon.com, Inc.‘s (AMZN) fitness wearable technology pages.
As should be no surprise, Wall Street analysts are getting excited. In fact, there have been recent bullish reports from Raymond James, Citigroup, Morgan Stanley and several others. All have conducted surveys that indicate strong demand for FIT offerings.
And some of the price targets on Fitbit stock are definitely juicy. For example, Citigroup’s Stanley Kovler has a $30 price target and Morgan Stanley’s Katy Huberty has one at $32.
Danger Still Abound for Fitbit Stock
All great, right? Absolutely. But investors should still be wary with Fitbit stock.
Consider that the bulk of the sales come in the all-important holiday quarter. And, as indicated with the latest earnings report from FIT, the outlook does not look encouraging. For the current year, the company expects revenues to increase by 29% to 34%, down from last year’s blistering 149% ramp. Yes, this is a big-time deceleration, and it is the key reason for the plunge in the stock.
Then again, the competitive landscape is getting intense. Just some of its many rivals include Garmin Ltd. (GRMN), Microsoft Corporation (MSFT) and Samsung (SSNLF)
But, its biggest threats may be Apple Inc. (AAPL) and Under Armour Inc (UA). Although the Apple Watch may have been a disappointment, it is still in the early stages, and there is buzz that AAPL may come out with a watch that is more focused on fitness.
Regarding UA, the company has been aggressively buying up mobile and online properties, which has resulted in a fitness platform called Healthbox. And yes, it also involves an HTC wearable device.
No doubt, UA has lots of marketing heft; after all, the company has some of the world’s top athletes on its roster, such as Stephen Curry.
In other words, the holiday quarter could be extremely tough for Fitbit. The company’s stock price has already discounted much of the recent good news from the Blaze and Alta: Since late-February, Fitbit stock is up a sizzling 40%.
So going into the next quarterly report — which comes out May 4 — it’s probably best to hold off for now. The markets are fairly edgy with tech operators right now, so even a slight miss — which has happened with Netflix, Inc. (NFLX), Alphabet Inc (GOOG, GOOGL) and Microsoft — can mean some pain for the stock price.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
