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Fitbit Can't Catch a Break

Image source: Fitbit.

Things haven't been going Fitbit's (NYSE: FIT) way this week. The US International Trade Commission ruled yesterday that three patents that Fitbit was hoping would give struggling rival Jawbone fits are invalid. The patents -- governing portable tracking devices, heart rate monitoring systems, and motion detection technology -- getting tossed effectively nixes a pending patent infringement trial that was supposed to start next month.   

It may not seem like a big deal on the surface. Jawbone's in a funk. It's been losing market share in the wearable technology market, and it went through a couple of rounds of layoffs last year. Even if Fitbit were to emerge victorious, would it be able to collect any financial rewards?   

However, having the patents and trial dismissed are events that still matter. Fitbit may have hundreds of issued patents and patent applications in its arsenal, but as a pioneer its intellectual property is something that can wield power over copycats and future competitors. Jawbone may be going through choppy moments, but Fitbit is now facing tech and athletic apparel giants with greater financial resources than Jawbone or Fitbit. 

Tracking the trackers

Fitbit stock has come under fire this year. The stock has surrendered 56% of its value. Revenue growth is decelerating, and margins are getting squeezed.

The stock's turnaround during the second half of this year relies on a strong holiday shopping season, and Wall Street pros now find themselves trying to get a read on how things will play out. Piper Jaffray completed a survey of well-to-do consumers that showed waning demand. The results indicate that 62% of the respondents have no intention to buy a Fitbit during the telltale holiday quarter.

This may not seem so bad. It may also seem incomplete. Fitbit will likely unveil new devices during this summer's annual IFA show in Berlin. We still don't know what they are. We still don't know if they will move the needle this holiday season. Piper Jaffray's analyst isn't upbeat. She has a neutral rating on the stock and a price target that's merely $14.

It's not the only analyst with survey findings to divulge this week. Baird -- also neutral on the stock with a higher $16 price target -- shows diminishing purchase intent. Just 22.1% of its respondents were planning to buy any fitness tracker, down from 23.9% from its April read. Making matters worse, of those with an intent to buy the percentage that are eyeing Fitbit-branded wrist huggers has gone from 63.7% to 57.7% over the past quarter.   

It's still early. We still don't know how the market will react to Fitbit's new wares, and even sometimes the initial read isn't correct. Critics initially panned Fitbit's foray into the smartwatch market earlier this year, but it went on to sell more than a million Blaze smartwatches during the first three months of this year. 

Fitbit has had a rough week, but it's way too soon to call the upcoming holiday gifting season a dud.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.