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Fitbit Needs Better Software to Grow Again, Says Morgan Stanley

Shares of wearable technology pioneer Fitbit (FIT) are down 8 cents, or 1.7%, at $5.14, after Morgan Stanley’s Yuuji Anderson this morning issued a note to clients suggesting the company needs more software smarts in order to stay competitive.

The focus on software comes in advance of Fitbit’s expected debut this year of its first-ever general smartwatch product, bringing it into closer competition with Apple’s (AAPL) Apple Watch.

Anderson’s colleague Katy Huberty is the one who actually formally covers Fitbit shares, and she has an Equal Weight rating on the stock. Huberty’s price target today gets cut to $6.50 from $7.

The premise of Anderson and Huberty is that the sensors that made Fitbit’s wrist-bands a big hit some years ago do not get better and better overnight.

As they write, "Functional hardware improvements occur in conjunction with new sensors and underlying software development, neither of which are driven by Moore's Law, and are therefore less predictable.

As a consequence, Fitbitneeds to "use software to smooth functional improvements”...