Why Fitbit Inc (FIT) Stock Is Rising on the Latest Ionic Update

Fitbit Inc (NYSE:FIT) got a nice boost when it finally announced its Ionic smartwatch at the end of August. But more good news about the Ionic has lifted Fitbit stock even more: The company is partnering with DexCom, Inc. (NASDAQ:DXCM) to bring blood glucose monitoring to the Fitbit Ionic.

Why Fitbit Inc (FIT) Stock Is Rising on the Latest Ionic Update

Source: Dexcom, Fitbit

With the ability to see their blood glucose levels on their wrist, in real time, the new Fitbit smartwatch will go beyond fitness to offer people suffering from diabetes a real reason to buy. And while the fitness market is big, the health market is huge.

Fitbit Announces Dexcom Partnership for Fitbit Ionic

Last week, Fitbit announced it was partnering with Dexcom, the leading manufacturing of continuous glucose monitoring (CGM) devices. The partnership will mean people suffering from diabetes who use one of Dexcom’s CGM sensors, will be able to view that data on their Fitbit Ionic smartwatch starting in 2018.

It’s important to note that this doesn’t mean that Fitbit has mastered the technology needed for an optical blood glucose sensor. Apple Inc. (NASDAQ:AAPL) has reportedly assembled a team that is hard at work on that technology for its Apple Watch, but it has not yet succeeded in cracking that very difficult problem.

Instead, the Dexcom CGM has a sensor that is inserted under the wearer’s skin to take blood glucose readings. It’s attached to a wireless transmitter. The transmitter sends data to a receiver. In the case of the Fitbit Ionic, the CGM sensor would send data wirelessly to the smartwatch, so the wearer could see results on their wrist, along with their other health and fitness data, including heart rate and blood oxygen level.

That’s not as convenient or unobtrusive as an optical CGM would be, but it’s the current state of technology. And besides, incorporating an optical CGM on a smartwatch would likely mean having to deal with an onerous Food and Drug Administration approval process that would wreak havoc with Fitbit’s product release schedule.

Fitbit Stock Reacts to the Potential

Fitbit is a leader — although no longer number one — when it comes to wearables. The company’s growth has been driven by consumers who are obsessed with tracking their fitness and activity, but that market is a relatively small subset of the population. In the last quarter, Fitbit sold 3.4 million activity trackers.

The Fitbit Ionic is expected to expand the target demographic by adding smartwatch fans to the mix. Fitbit stock got a bump on the Ionic announcement based on the possibility that some potential Apple Watch buyers might be tempted by a FIT smartwatch.

Health monitoring –and in particular diabetes– is a whole other story. Worldwide, it’s estimated that over 400 million people are diabetic. The key to maintaining their health is managing blood sugar levels and the way to do that is through blood glucose monitoring. Turning the Fitbit Ionic into a handy display for a Dexcom CGM is a quick way to turn the Fitbit smartwatch into an attractive accessory for a huge market. That’s why Fitbit stock popped 7% on the announcement of the partnership.

Reality Check

The Dexcom CGM partnership is big news for Fitbit. However, the arrangement isn’t exclusive. In fact, Dexcom has supported the Apple Watch since 2015 … Apple CEO Tim Cook has been spotted wearing a CGM to track his blood sugar levels on an Apple Watch, and if it isn’t a Dexcom model he’s using, it’s something similar.

FIT does have an advantage, though, in the Ionic’s superior battery battery life. That would support wearing the Fitbit Ionic at night, while most Apple Watch users will have to skip the Dexcom connection to recharge their smartwatch.

The wildcard here is the Apple Watch Series 3, which is expected to be unveiled today at Apple’s big iPhone event.

Apple hasn’t said a whole lot publicly about its own capabilities in this area, but given the fact that Tim Cook has been wearing a CGM and Fitbit has gone ahead and made this announcement, it’s possible that Apple might just feature that CGM support when it shows off the new Apple Watch Series 3. Just to knock FIT back down a peg.

With that new Apple Watch expected to make an appearance today to counter the Fitbit Ionic, keep a watch on Fitbit stock. It’s going to react to what Apple announces…

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2017/09/fitbit-inc-fit-stock-fitbit-ionic/.

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