Fitbit Inc (NYSE:FIT) has had a rough year already. Sales have been down significantly as it gets squeezed between increasingly fitness-focused smartwatches on the high end and cheap fitness trackers from China on the low end. Making matters worse, its core U.S. market is reaching saturation. As a result Fitbit stock is down nearly 20% since the start of 2017 and over 85% since its all time high in July, 2015.
The company just announced a new Fitbit Alta HR activity tracker, but is adding heart rate monitoring to an existing fitness bracelet (and boosting the price) going to help turn things around for FIT stock?
Fitbit Alta HR
Yesterday, Fitbit announced the Fitbit Alta HR. The company followed the same basic strategy it used with last year’s Charge 2: Take an existing fitness tracker and add heart rate monitoring.
In this case, the Alta — FIT’s fitness bracelet aimed at more fashion-conscious consumers — was updated with the company’s PurePulse heart rate sensor. FIT is billing it as “the world’s slimmest fitness wristband with continuous heart rate.” The new version is also more expensive: $149.95 compared to $129.95 for the original.
This price point makes the new Fitbit tracker the exact same price as the Charge 2. Both offer pretty much the same features, including heart rate monitoring and the ability to switch bands for different looks. The primary difference between the two (besides a slimmer form factor) appears to be that the Alta HR lacks the Charge 2’s ability to use a connected smartphone’s GPS. However, the new Fitbit offers superior battery life to the Charge 2, with a claimed 7-days between charges instead of 5-days.
FIT’s Challenging Year
The trouble for Fitbit stock actually started in earnest as 2016 began to wind down. The company faced a litany of problems, including production issues with its latest models and ongoing legal issues with rival Jawbone.
Apple Inc. (NASDAQ:AAPL) released the Apple Watch Series 2 in September, adding an even greater focus on fitness. AAPL lowered the price of the original Apple Watch, making it more tempting to customers who had been considering a new Fitbit because the smartwatch was too expensive. The icing on the cake was Apple’s Nike Inc (NYSE:NKE) partnership that resulted in the Apple Watch Nike+ fitness smartwatch, which arrived just in time to tempt holiday shoppers.
FIT bought the IP from struggling smartwatch pioneer Pebble in December, but that move has not had any material impact on on its product line as yet. If anything, the move angered Pebble fans.
In the latest bit of bad news for Fitbit stock, a report for Q4 wearable sales shows Apple hit a new record with the Apple Watch, while China’s Xiaomi saw its fitness tracker sales grow 96.2% year-over-year. FIT had a rough quarter, with sales down 22.7%.
Are Products Like the Fitbit Alta HR the Answer?
In its quarterly report on wearables, IDC summarized the challenges FIT faces:
“However, the company also faced one of its largest declines ever as it remained heavily focused on the U.S., a market that is quickly approaching saturation for fitness trackers. Though the company has grown in other parts of the world, it also remained challenged as low-cost competitors eat away at Fitbit’s market share.”
The Fitbit Alta HR is without a doubt a good fitness tracker. But is heart rate monitoring a big enough new feature to convince Alta owners to upgrade? For those looking for a first fitness tracker (in this increasingly saturated U.S. market), the identically priced Charge 2 makes for a confusing choice.
For those who want a fitness tracker without spending $150, Xiaomi’s MI Band 2, which offers the same basic features as the new Fitbit, including heart rate monitoring, OLED display, sleep tracking, smart phone alerts and interchangeable bands — goes for under $30. Clearly FIT won’t sell many of its new Fitbit trackers in China and online retailers are selling cheap MI Bands to U.S. buyers as well.
In other words, the Fibit Alta HR isn’t likely to do much to turn around Fitbit’s fortunes. If the company is able to integrate that Pebble know-how it acquired into a device that satisfies its hardcore user base while attracting potential smartwatch buyers — something the Fitbit Blaze has struggled to do — then it might be on to something.
For now, it seems like FIT is treading water.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
