If you bought Fitbit (NYSE:FIT) shares on Friday, Oct. 25 when they were near $4, you’ll be a very happy bunny this Halloween. But if you bought shares near Fitbit’s 2015 initial public offering — when FIT stock went for $20 per share — you won’t
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) does seem to be kicking the tires on the wearable company. But any bid will be closer to the Oct. 30 $6 share price than the $20 share price Fitbit opened at in June 2015, when the fitness tracking craze was at its height.
There’s only one conclusion to draw. Win or lose on Alphabet, Fitbit is a failed IPO. But do you sell now or wait for a bidding war?
Take the Loss?
There are plenty of reasons to sell out and — if you were a long-term buyer of Fitbit shares — to take your loss.
Before the takeover rumors started, Morgan Stanley had a $3.20 price target on the stock. While a Google purchase seems straightforward, it would have to be approved by regulators around the world. Some in the United Kingdom already want it stopped as a “data grab.”
That may be all this is. As Engadget notes, Fitbit has health data going back a decade, thanks to its roll-up of smaller failures like Pebble, Victor, Coin, Fitstar and Twine Health. The Fitbit operating system is incompatible with Google’s own Android Wear. Google might just want to sell its assets, take its tax write-offs and shut the rest of it in order to paint Apple (NASDAQ:AAPL) and its Apple Watch as an evil monopoly.
Fitbit has been getting killed on both the high and low end of the market. Up on the high end is Apple, which now dominates the whole market. On the low end is Xiaomi and other Chinese companies who are soaking up what remains of the fitness tracking craze.
On the Other Hand …
The holy grail for watch makers has always been to prove their apps have medical usefulness so insurers cover them.
United Health (NYSE:UNH) and CVS (NYSE:CVS), Aetna’s owner, have offered discounts to buyers of the Apple Watch. UNH says users can “walk off” the price by attaining exercise milestones. CVS users can use an app called Attain that offers points for meeting fitness goals. Some managed health companies in the Medicare Advantage arena are also offering discounts to the elderly, who can use it if they’ve fallen and can’t get up.
Fitbit is not regulated as a medical device. But the U.S. Food and Drug Administration did launch a “pre-certification” program for wearables in 2017 which Fitbit is participating in. Alphabet’s Verily unit is another participant. Fitbit devices, however, do not yet have an electrocardiogram monitor. Apple has been using such a monitor to save lives and sell gear.
If insurers won’t pay for Fitbit devices, maybe users will pay more. In September Fitbit launched “Fitbit Premium,” a $10 per month subscription that promises to help with weight loss and provides a health report that users can bring their doctors.
The Bottom Line on Fitbit Stock
Fitbit is due to report earnings Nov. 6. Analysts are expecting a loss of 16 cents per share.
Unfortunately, Google will decide whether to buy the company before those numbers — or any hints as to whether the subscription gambit is working — come out.
By way of full disclosure, I have worn a Fitbit for several years and enjoy it, both for measuring steps and sleep, which becomes a challenge as we age. I won’t buy the Apple Watch because I don’t have an iPhone. If Google did buy Fitbit and kept the company going, it would please me.
The march of wearables toward proven medical devices will be a long, hard slog. Google has the cash for the slog. But does it have the stomach for it? If Alphabet bought Fitbit for stock, you’d need to own over 200 Fitbit shares to get one share of Alphabet.
It’s time to sell Fitbit stock.
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL and CVS.