Wearable device maker Fitbit Inc (NYSE:FIT) has had a pretty dismal first half of 2017. So far this year, FIT stock has declined 30% and the activity tracking wristbands have been quickly losing momentum among consumers. With that said, the massive tech stock decline that we saw on Friday and Monday left Fitbit completely unscathed. In fact, the stock was up 1.75%.
The FIT stock pop has left some investors wondering whether this is the beginning of a long awaited rally, but jumping onboard what appears to be a completely unfounded lift would be a very risky move.
Nothing has changed for Fitbit stock since I last recommended avoiding it, so traders would be wise to keep their distance and instead opt for a beaten down tech stock that has a clearer future, like Facebook Inc (NASDAQ:FB) or Amazon.com, Inc. (NASDAQ:AMZN).
FIT Is Losing Marketshare
A strong brand name was pretty much the only thing Fitbit had going for it — that and the fact that it was the first fitness tracker to appeal to the masses. Now, much of that clout has faded and the company is struggling to hold on to consumers.
Market researcher IDC released a study showing that the market for devices was up 18% in the first quarter. That data suggests that consumers are still interested in adding to their tech repertoire. However, it appears that Fitbit has missed the boat on this expanding market because the company has been rapidly losing marketshare to tech giant Apple Inc. (NASDAQ:AAPL) and China’s Xiaomi.
FIT stock has been treading water for the past year, clinging on to the idea that many consumers are still interested in basic activity trackers. However, the IDC study showed that this year, slowing demand for Fitbit devices caused the company to go from being the leading wearables provider to the third runner up, behind AAPL and Xiaomi.
As Matt McCall mentioned, Fitbit probably isn’t going bankrupt any time soon, but that doesn’t mean FIT stock is a good buy. The fact is that Fitbit is in a terrible position. The company is hitching its wagon to an upcoming smartwatch release, a move that is extremely unlikely to reignite demand because FIT is simply too late.
Management has been positive about the impending watch, saying that its increased functionality and self-contained app store will reinvigorate the brand.
While there are probably some die-hard Fitbit fans out there that will be excited about the watch, the competition that the brand is facing from Apple Watch and the plethora of Android wearables will likely keep the Fitbit smartwatch from making it very high off the ground.
Bottom Line for Fitbit Stock
Things don’t look great for FIT stock. The company’s new smartwatch, if well received, could give Fitbit shares a bit of a lift. However, that’s a pretty big if. At the moment, the company doesn’t have much else to look forward to so its difficult to be optimistic about the stock’s future.
Fitbit could eventually find itself in a buy-out situation, in which case the shares might become more valuable. However, the lift that FIT stock saw this week could be shareholders’ last opportunity to take the money and run before the stock begins its final decent. Putting money into FIT stock now is a massive gamble. Unless the company is able to come out with fresh ideas for a turnaround strategy, Fitbit will eventually make its way to zero.
As of this writing, Laura Hoy was long AAPL, FB and AMZN.