By Cody Miecnikowski
Fitbit Inc (NYSE:FIT) shares hit $42.15 yesterday, July 7, marking a 100% increase from its IPO price last month. The company has continued to show momentum along with brand leadership, an expanding product line, and growing sales. Wall Street analysts are weighing in as Fitbit is on track to grow and penetrate a large share of the global fitness market.
San Francisco-based Fitbit is a provider of health and fitness products. Fitbit is known for its wrist bands and waist clips that automatically track users’ daily steps, calories burned, distance traveled, floors climbed, and lastly, display real-time feedback.
The company’s products offer users the ability to connect health and fitness devices with software and services. Such technology includes an online dashboard and mobile applications, data analytics, motivational and social tools, personalized insights, and virtual coaching through fitness plans and interactive workouts.
According to the IDC, global wearable shipments are expected to rise from 21 million in 2014 to 45.6 million in 2015 and 126.1 million in 2019. It is important to note that Fitbit held 85% of U.S. market share in Q1, with global share estimates closer to 34%.
Robert W. Baird analyst William Power issued an upbeat research note on the maker of the fitness activity trackers. On July 6, Power initiated coverage of the stock with a Buy rating and a $52 price target, noting that among other catalysts, Fitbit has “the brand leadership amidst strong secular fitness trends.”
The analyst observes the expansion of Fitbit’s product line, commenting, “Fitbit’s early success was driven by very basic activity trackers in one’s pocket or on the wrist.” He continues, “The latest product, the Surge, which was introduced in December 2014, retails for $250, and includes GPS in addition to the all of the previous activity and heart rate measurements.”
Furthermore, Power comments that sales have picked up overseas. Revenue outside the U.S. represents just 21% of Q1 sales and 24% for all of 2014. He states, “We believe international expansion represents a significant opportunity for the company.”
In regards to paid services, “Fitbit’s longer-term aspiration is to drive additional revenue streams from software and services fees, capitalizing on its device and app. customer base. To this end, it recently acquired FitStar to enhance its online software capabilities. This is also a major focus of its current R&D efforts.”
Fitbit believes that the global fitness market exceeds $200 billion annually, signifying a huge opportunity for the company. Power comments, “Ultimately, Fitbit aims to grab a much larger share of the broader global fitness and weight loss spend.”
When measured over a one-year horizon and no benchmark, William Power has an overall success rate of 67% recommending stocks, earning +15.3% average return per recommendation.
RBC Capital analyst Mark Sue also initiated coverage on Fitbit, recommending a Buy rating with a $45 price target on June 30. Sue noted, “the wearable fitness tracker company is quickly gaining market share in a growing connected health and fitness business.” He continues to note that studies show consumers “clearly” prefer Fitbit’s brand to its competitors, such as the Apple Watch.
The analyst continues, “A broadening ecosystem, international and corporate wellness growth may enable Fitbit to reach $2.3 billion in revenue in fiscal 2017, a 45% compound annual growth rate.” Sue wrote, “We see Fitbit growing into a wellness tech platform in a category that’s broader than wearables. The healthier lifestyle change we’re seeing in the US is being mirrored overseas and international contributes about 25% of sales, offering substantive growth opportunities.”
When measured over a one-year horizon and no benchmark, Mark Sue has an overall success rate of 56% recommending stocks, earning a +4.9% average return per recommendation.
All four analysts polled by TipRanks who cover FitBit are bullish. The average 12-month price target for Fitbit is $42.25, marking a .24% potential upside from where the stock is currently trading. On average, the all-analyst consensus for Fitbit is a Strong Buy.