Fitbit Inc Stock Shows a Glimmer of Hope with Ionic Sales Bump

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Fitbit Inc. (NYSE:FIT) has had a tough few years. The company has seen its share price decline steadily since 2015 and investors have been unwilling to trust in CEO James Park’s turnaround plans thus far. The firm unsurprisingly posted yet another loss for the third quarter, but a deeper dive into Fitbit’s earnings report reveals that there may just be a light at the end of the tunnel for FIT stock.

Device Sales

Perhaps the most important metric for FIT right now is the firm’s device sales. The third quarter saw a 32% year-over-year decline in the number of devices sold, but on the bright side, that figure was up 7% from the previous quarter.

That’s great news for FIT bulls, because it suggests that the company’s newest device, the Ionic smartwatch, has been well-received by consumers. Many have pointed to the smartwatch as a turning point for FIT stock, and they may very well be right.

Based on the reviews that the Ionic has been getting on Amazon, Park said he believes the launch of the Ionic has had the best customer reception of any of the firm’s products.

That’s a big deal for Fitbit because the Ionic is really the lynchpin for the company’s future strategy. Rather than simply offering health tracking devices, Fitbit has its sights set on making some of its own premium apps that customers must pay to access. The first step in creating this ecosystem is the watch itself; customers need to like it enough to be willing to invest in a totally separate app store from the existing one on their smartphone.

However, Fitbit’s premium Coach app looks to be gaining momentum as well. The number of customers accessing premium content has increased by 75% over the past year. At the moment, Fitbit apps aren’t generating a meaningful amount of revenue, but the fact that they are gaining traction suggests that the firm’s turnaround plans are taking shape.

A Nod from the NIH

Fitbit got another boost from the National Institutes of Health (NIH) which has elected to use FIT devices in its All of Us research program. The NIH is going to give 10,000 volunteers Charge 2 and Alta HR fitness trackers in order to collect data on their sleep, activity levels and heart rates. The data will be used in a study aimed at understanding how lifestyle affects a person’s health.

There are a few reasons that this is great news for FIT stock. First of all, being used in an official data collection exercise by the NIH gives FIT devices some serious clout. If the wearables are considered accurate enough to provide meaningful information to the NIH, casual users will be more likely to trust them.

Not only that, but simply getting 10,000 people out there with Fitbits on is definitely not a bad thing from FIT’s image. Also, the All of Us program encompasses than 1 million people. So if the first year goes well the NIH may want to order more, something that would certainly up Fitbit’s sales significantly.

The Bottom Line for FIT stock

Fitbit’s third quarter earnings were definitely not what I’d call promising. The firm is still struggling to sell devices and turn a profit and FIT’s stock price of just $5.81 reflects that. Making physical tech products requires a lot of R&D spend, so FIT will struggle to keep costs down while also bringing out new products to keep up with the rest of the market.

However, this quarter was the first time in a long time that FIT had anything remotely positive to offer, and there was certainly some evidence that the firm’s turn around plans might just work.

With the holiday shopping season coming up, now might be a good time to add FIT stock to your portfolio. The Ionic smartwatch could end up being a hot gift this year, and since Fitbit’s fourth quarter last year was a disaster, even a lackluster fourth quarter this year would be an improvement.

Much of the decision of whether or not to buy FIT stock hinges on whether or not you believe there is room in the market for another smartwatch maker with its own app ecosystem. If your answer is yes, then FIT stock is a great long-term play because the firm appears to be making strides toward becoming a serious player in the wearables space.

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

Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2017/11/fit-stock-glimmer-hope/.

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