Fitbit (NYSE: FIT) bears believe that Fitbit stock is overvalued, citing the company’s falling market share and revenue, as well as tough competition in the wearables space.

But as I’ve pointed out in the past, the company’s smartwatches are actually superior to Apple’s (NASDAQ:APPL) Apple Watch in many ways, while its partnerships with health insurers should enable it to greatly increase its revenue and its alliance with Alphabet’s (NASDAQ: GOOG)(NASDAQ:GOOGL) Google and Dexcom (NASDAQ: DXCM) should result in great innovations. Meanwhile, the upbeat reviews for the company’s new Versa smartwatch should cause more people to give the Fitbit product a chance– enabling them to see how it is superior to Apple Watch. The company has also released Ace, the first and — as far as I know — so far the only smartwatch geared for kids.

Here’s a look at three different scenarios — bear, base and bull — for Fitbit stock to enable investors to get an idea of the risk/reward outlooks going forward:

Bear Scenario for Fitbit Stock

Revenue from the Versa  ends up being only 20% to 30% higher than those of the Ionic as Apple’s higher marketing dollars and great reputation, along with  cheaper imports from Chinese companies, keep a lid on sales of Fitbit’s new device. However, enough diabetic patients, women who want to utilize Fitbit’s new female health tracking system, Android users, and smartwatch enthusiasts who like its lower price, long battery life and Coach app buy the Versa to keep sales of the product from crashing. Revenue from the company’s Coach app also rises around 20% annually, and FIT sells around 300,000 Ace devices per year. A few more health insurers and major companies incentivize their customers/employees to use Fitbit products. The collaboration with Google doesn’t result in any major innovations. And additional wearables released by Fitbit are not nearly as popular as the Versa.

In this scenario, rising revenue from slightly higher sales of Versa, Ace, and the Coach app, along with increased revenue from employee and insurer incentivization programs, will be largely, although not completely, offset by lower tracker sales. Fitbit’s revenue will increase around 10% per year. Investors will realize the company is not going to thrive — but isn’t going bankrupt anytime soon. In this scenario, Fitbit stock will reach around $10 per share in early 2019. FIT could be acquired for around 20% more than in 2019 or 2020.

Base Scenario for Fitbit Stock

Versa gathers a great deal of buzz and becomes quite popular among the groups mentioned previously. Revenue from the Versa is about four times that of the Ionic in 2018 and rises to six times its level during the holiday season of 2018 and in early 2019 as the device takes a great deal of market share from Apple Watch and other rivals.

About 20% of U.S. health insurers and 5% of major U.S. employers incentivize their customers/employees to use FIT devices. Revenue from apps quadruple year-over-year, becoming significant. Ace sells at an annualized pace of 1 million. Due to incentives offered by employers and insurers, and the buzz around Fitbit, tracker sales remain little changed. Innovations created by Fitbit in tandem with Google and Dexcom cause 10% of doctors to start advocating some of their patients use the device. Fitbit’s revenue doubles in the fourth quarter of 2018 and the first quarter of 2019, enabling it to become significantly profitable. Fitbit stock reaches around $25 by April 2019.

Bullish Scenario for Fitbit Stock

Versa becomes by far the world’s best-selling smartwatch by the holiday season, obtaining market share of around 70%. It is one of the five “must-have” products of the  holiday season.

About 50% of health insurers and 15% of major U.S. employers incentivize their customers/employees to use Fitbit devices as the products’ diagnostic capabilities and their ability to promote people’s health become much more widely accepted. Contributing to the latter sentiment are blockbuster innovations made by Fitbit and its partners. In the wake of these innovations, about 25% of  U.S. doctors recommend that at least some of their patients use a Fitbit device. Ace sells at an annual rate of 4 million. New wearables released by Fitbit also generate strong sales.

In this scenario, Fitbit revenue would quadruple and its annualized net income would reach about $1.5 billion. Fitbit stock would jump to at least $45 by April 2019. The company could be acquired by the end of 2019 for as much as $80 per share.

As you can see from these scenarios, the risk/reward ratio for Fitbit stock is quite positive. Consequently I recommend buying FIT stock.

As of this writing, Larry Ramer owned shares of FIT stock.