Fitbit shares climbed by more than 4% to $28.86 per share after a report from an analyst who claims that the company’s sales are “exploding.” Sentiment on the wearable manufacturer has been decidedly negative since earlier this year, with the most recent steady decline beginning in early November. The 52-week high is $51.90 per share, while the stock continues to hover just above the 52-week low of $26.46 per share.
Fitbit demand has surged
In a report dated Dec. 20, Pacific Crest Securities analyst Brad Erickson said while his checks of Fitbit products around Black Friday indicated weak sell-through, his latest checks suggest that demand has picked up significantly. He described his Black Friday sales checks as “inexplicably weak” and his most recent checks as “much improved.”
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When Erickson did his checks, he noted that in the past, 30% to 40% of Fitbit’s sales annually were online, which meant then that it was plausible that this metric could reach 50% of higher over the holiday shopping period.
‘We are obviously encouraged by seeing in-store demand come back so strongly as a proxy for overall demand,” he wrote.
Strong demand in store
In his checks, Erickson said the number of inventory days has fallen under ten days and that sell-through run rates have doubled since last month. He added that 30% of the stores he checked are experiencing temporary sell-outs and that a third of Best Buy stores are having trouble keeping Fitbit’s Charge HRs in stock. Further, he believes that Fitbit’s share of the wearable market is still dominant and may possibly be improving so far during the fourth quarter.
The analyst also found during his checks that Fitbit has not been discounting its products, but its competitors in the wearable category (including both Apple and Garmin) have been doing so quite widely.
Upcoming catalysts for Fitbit
Looking forward, he sees several major catalysts, like the Consumer Electronics Show, which is set for next month. The analyst believes we could see new products at the show. Also company management has reported that they continue to make progress in their corporate wellness programs by signing more and more partners, and Erickson notes that the company is in the lead in this category and believes that most investors are heavily discounting this fact. He also sees potential for Fitbit with insurance companies.
The analyst maintains his Overweight rating and $47 per share price target on the wearable maker’s stock. He believes that the recent pullback in Fitbit shares (which occurred following a story about the first Apple Watch refresh) offers an attractive entry point for investors as the company’s fundamentals appear to be strong.