Fitbit climbed in premarket trading after Raymond James analysts said they upgraded it, but the stock is volatile today as analysts from at least two firms have cut their price targets for it. In fact, one of the price cuts was almost in half, although interestingly, the firm remains bullish.
Raymond James upgrades Fitbit for channel checks, valuation
In a report dated Jan. 21, Raymond James analyst Tavis McCourt said he has upgraded Fitbit from Market Perform to Outperform and set a price target of $25 per share. He said Wall Street remains concerned about the size of the fitness wearable market, but he’s not worried about it. He thinks the concerns are overblown and reported that his survey of consumers indicates that there’s still room for the category to grow. He found a big gap between the number of those who plan to buy a fitness band or smartwatch sometime and those who already own one.
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Further, he found that Fitbit is still the dominating brand in purchase intentions. For now, he believes both sell-through and market share trends are still strong.
Make no mistake in product release timing
The analyst adds that while investors were apparently worried about the announcement of the March launch for the company’s new Blaze wearable because both GoPro and Apple have made mistakes in the timing of new releases over the last year or so. He said the device is basically an upsell for customers who already own a Charge HR because the screen is much better and it integrates with a smartphone at a much lower price and with a better battery life than the Apple Watch.
He thinks the Blaze will “sell just fine” but sees the more important takeaway is that it “ushers in significant peripheral sales” for the company through multiple watch brands. He expects one or two high-end devices to be launched this year at some point as well. He doesn’t believe that Fitbit is making the same mistake as GoPro because he believes it is innovating better than the camera maker in the year after its initial public offering.
He also noted that there have been several reports indicating that the Apple Watch 2—previously expected in March—might not arrive this spring but rather in the fall. The Raymond James analyst believes this should calm competition concerns and that the Apple Watch still targets a totally separate market than Fitbit’s devices.
Fitbit price targets cut at Stifel, SunTrust
Stifel analysts have finally come back down closer to earth with their new price target on Fitbit, which is $35 per share. Their previous target was $65. Analyst Jim Duffy still rates the stock as a Buy though. He still likes the brand name and believes its growth opportunities are still strong. The main reason he cut his target is because there has been more than one compression. He also noted that investors have a lower tolerance for risk right now. He believes execution and signs of demand for Fitbit’s devices will boost investor sentiment on the company’s stock.
SunTrust analysts also cut their price target, pushing it down from $48 to $30 a share, although they still have a Buy rating on the stock. Shares of Fitbit were up 0.84% at $17.94 as of this writing.
Graphs in this article are courtesy Raymond James.