Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Fitbit Gains From Partnerships, Market Share Loss a Concern

On Jan 2, we issued an updated research report on Fitbit Inc. FIT, one of the leading providers of wearable fitness trackers.

Shares of Fitbit have declined 10.1% in the past 12 months, underperforming the 1.8% decline of the industry it belongs to.

Fitbit has made a lot of progress on the corporate wellness front, by selling fitness trackers and software subscriptions to employers as part of their corporate wellness programs. The company has already partnered with several enterprises and healthcare companies. It has over 1,300 enterprise customers and 70 of them are Fortune 500 companies.

Fitbit is witnessing strong international growth. The company has penetrated Indian and Chinese markets by entering into various partnership programs. In 2016, Fitbit generated 29% of its revenues, based on ship-to destinations, from outside the  United States. Currently, the company sells its products in 65 countries.

However, Fitbit’s growth has been slowing down with smartwatches outshining the fitness wearable category, influx of new wearables, lack of upgrades among existing users and lackluster growth in the Asia Pacific region. The company faces tough competition  for both high- and low-end products. The company’s biggest competitors are Apple, Xiaomi and Garmin. There are other big manufacturers too who are developing connected devices on Alphabet owned Google's Android operating system.

Fitbit is trying to maintain its foothold in the market. According to the latest International Data Corporation (IDC) report, Fitbit and Xiaomi tied at the top in terms of third-quarter 2017 shipment volumes, with each having shipped 3.6 million units. Apple  was pushed back to the third position with 2.7 million units shipped. In terms of market share, Xiaomi and Fitbit  hold 13.7% each, followed by Apple with 10.3% share.

To counter this headwind, Fitbit came up with its turnaround strategy. The company realigned its business into two parts — Consumer Health & Fitness and Enterprise Health. The Consumer Health & Fitness business focuses on delivering more efficient health and fitness devices while Enterprise Health focuses on building relationships with employees, insurance companies, health systems and healthcare partners.

The market for wearable fitness devices is continuously growing. Per IDC, the market for wearable devices will increase to 240.1 million units by 2021, at a compound annual growth rate (CAGR) of 18.2%. This presents significant growth opportunity for Fitbit and the company looks well positioned to capitalize on it.

Zacks Rank & Stocks to Consider

Fitbit has a Zacks Rank #3 (Hold).

Micron Technology MU, Broadcom AVGO and NVIDIA Corporation NVDA are some of the better-ranked stocks in the broader technology sector. All these stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Micron, Broadcom and NVIDIA is currently projected to be 10%, 13.75% and 10.3%, respectively.

Investor Alert: Breakthroughs Pending

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.

Click here to see them >>
 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Broadcom Limited (AVGO): Free Stock Analysis Report
 
Fitbit, Inc. (FIT): Free Stock Analysis Report
 
NVIDIA Corporation (NVDA): Free Stock Analysis Report
 
Micron Technology, Inc. (MU): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research