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Fitbit IPO: Investors Will Love FIT Right Out of the Gate

Fitbit IPO

The Fitbit (FIT) IPO was a hit Thursday, as the seller of highly popular fitness devices pulled off a two-day double whammy.

The Fitbit IPO priced Wednesday at $20 per share to top its expected range of $17 to $19, which itself was lifted after an initial range of $14 to $16. And on top of all that, the number of shares offered in the Fitbit IPO was increased from 29.9 million to 36.6 million.

FIT stock followed up that performance with an early spike of roughly 50% when shares debuted Thursday.

Get to Know Fitbit

Fitbit is a pioneer in the wearables space that got its start back in 2007. Co-founders James Park and Eric Friedman saw a huge opportunity to make fitness technology thanks to advances in sensors and mobile technologies. The mission:

“Fitbit helps people lead healthier, more active lives by empowering them with data, inspiration, and guidance to reach their goals.”

Park and Friedman executed on this in a big way. Since founding Fitbit, the company has sold more than 20.8 million devices, and its U.S. market share for “connected activity trackers” is a staggering 85%, according to NPD.

That rampant growth has obviously filtered down to its financials, with revenues soaring from just $14.5 million in 2011 to $745.4 million in 2014. And last year, Fitbit even became profitable, registering net income of $131.8 million.

Given how many offerings come to market with no earnings in tow, that fact alone helps explain why the Fitbit IPO has been a quick success out of the gate.

This growth has come thanks to Fitbit’s laser focus on product innovation. It helps that Fitbit builds both hardware and software, which has translated into sophisticated analytics, smaller sizes, longer battery life and an overall better experience than other fitness devices, on the whole.

Fitbit devices can track things such as steps, calories burned, distance traveled, floors climbed, sleep duration and heart rate. Meanwhile, they offer seamless integration with smartphones powered by Apple (AAPL) or Google’s (GOOG, GOOGL) Android.

What’s more, Fitbit has leveraged big data to increase engagement.

For instance, Fitbit provides dashboards and social media functions that track performance versus friends (so, things like leaderboards, progress notifications and virtual badges). And Fitbit also has a virtual coaching service that does its work through instructional videos.

There’s Plenty to Love About the Fitbit IPO

The road ahead is littered with growth. According to an IDC report, the consumer spend on wearables is growing faster than any segment of consumer electronics. The research firm forecasts that by 2018, 114 million wearable units will be shipped, amounting to revenues of $33.7 billion.

With Fitbit’s strong brand, large customer base and strong technology platform, the company is definitely in an ideal position to get a sizable share of this opportunity. And it’s already moving aggressively into foreign markets, as well as into new categories such as corporate wellness.

Even after a deep look into the company, it’s very difficult to find any significant problems with the Fitbit IPO.

Now, the fact that Fitbit is a glowing company doesn’t automatically mean you should buy the stock — after all, there are many good companies, but not all of them are lucrative investments. And red-hot IPOs typically see tremendous volatility at the onset, especially as the hype subsides. Just look at GoPro (GPRO), which roughly tripled a few months after going public, but then lost 60% of those gains through March of this year.

Of course, first-day investors of GPRO still are doing very well on their investments, but even those who waited for GoPro’s hype to finally subside and bought low are sitting on 50% gains.

I typically preach patience with IPOs, because more often than not, better buying opportunities pop up within just a few months after a company has hit the public markets. And I’ll suggest the same about the Fitbit IPO.

But FIT stock will be a good bet, especially ahead of the Christmas season, which should be rife with excitement over Fitbit’s new products.

Note: Lead underwriters on the Fitbit IPO included Morgan Stanley (MS), Deutsche Bank (DB) and BofA Merrill Lynch (BAC).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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