Although I’ve been bullish on Fitbit Inc (NYSE:FIT), I’m under no delusions of grandeur. After all, “momentum” is a loose term when you’re talking about FIT stock. One moment, shares are on a roll. The next, Fitbit seems poised to fall off a cliff. Nevertheless, I’m giving the embattled fitness-tracking company the benefit of the doubt. Today, FIT stock is taking off on a glucose-monitoring partnership with DexCom (NASDAQ:DXCM).
Since the first of August, FIT stock performance as been a rarity for the embattled fitness-tracker company. In a little over a month, Fitbit shares gained 16% in the markets.
This bullishness is particularly impressive given that year-to-date, the company is still down 19.5%. In other words, I find it encouraging that not only has the hemorrhaging apparently subsided, but that Fitbit has provided investors with something substantive.
Admittedly, Aug. 1 is personally notable because that’s when I stuck my neck out with an optimistic article. I stated that it was too early to call time on Fitbit stock. Yes, it completely ran counter to the prevailing opinion. Both mainstream analysts and my InvestorPlace colleagues have warned against long exposure to Fitbit.
If I could sum up the pessimism, the fitness-device maker is no longer the trendsetter. More critically, FIT stock faces considerable competition from the likes of Apple Inc. (NASDAQ:AAPL) and Samsung Electronics .
On the flipside, the markets tore apart Fitbit stock. No one expects anything from them, which can have a dramatic impact psychologically. With the pressure off, management can focus on core improvements, rather than just the day-to-day financial volatility.
But is low expectations enough to power FIT stock further? Or should speculators take profits off the table and move to another opportunity?
FIT Stock Will Bank on Fitness Specialization
Beating up on Fitbit stock is the “in” thing to do, so I understand if investors are shaky. Beyond that, advancing smart-device technologies means that one platform can do it all. And this is one of the central arguments against Fitbit: Why buy a health-tracking device if an Apple Watch can perform the same exact functions?
For one thing, Apple devices can do everything, but they really shouldn’t. What I mean is that dedicated platforms aren’t going the way of the dinosaur. There’s a reason why home designers don’t put the dining table inside the bathroom. Function-specific rooms will never go out of style.
So it is with consumer electronics. According to the latest rumors, a premium version of the upcoming iPhone 8 could cost around cost around $1,000. CNET‘s John Falcone argues that iPhone fans shouldn’t “freak out.” Some of the best smartphones available today are already at or above four-digit price tags. In addition, financing options ameliorate the cash-flow sting.
Essentially, customers are used to high-priced devices. But what they’re not used to is putting these high-dollar assets unnecessarily into harm’s way. Bears mock FIT stock because today’s consumer technologies are a jack-of-all-trades. Are they, however, a master of any of them?
Take a look at the Fitbit Flex 2. For under $60 retail, I acquire a stylish, discreet fitness tracker engineered specifically for athletics. Furthermore, the Flex 2 is water-resistant for common aquatic activities. Several Apple and Samsung products claim water-resistant capabilities. Is anyone clamoring to test it out? I doubt it.
Even at the higher end of the Fitbit price spectrum, end-users won’t necessarily fall into financial destitution in case of failure or irreparable damage. For instance, the feature-loaded Charge 2 can be had for under $150.
Bearish Argument Against Fitbit Is Overplayed
While I acknowledge that Fitbit stock faces strong challenges as modern devices integrate an increasing array of functions, this argument is overplayed. Multi-tasking will never completely replace specialization, and that goes for any industry.
I worked in the imaging department of Sony Corp (ADR) (NYSE:SNE) for several years, and I say with confidence that digital-SLR cameras will never be replaced by smartphone cameras. Why? Because the crux of photography lies in the quality of your lighting, and the quality of your glass. No professional photographer in his or her right mind will eschew the digital-SLR format for a puny smartphone camera.
When I hear arguments that FIT stock stinks because your iPhone can substitute as a fitness tracker, I smirk. A Swiss Army knife is a wonderful tool, especially in a pinch. But if I’m eating dinner, I’d rather have a plain old knife.
Ultimately, the direction of FIT stock may depend largely on global fitness trends. If people are serious about losing weight, Fitbit’s dedicated platform and multiple price options is most ideal. Moreover, the company’s large following and health-focused applications ensure their relevancy.
Josh Enomoto is long SNE stock.
