Fitbit shares climbed by more than 9% to as high as $16.53 on two bits of positive news. The company issued a press release saying that it shipped more than 1 million Blaze smartwatches and 1 million Alta fitness wearables in the first month they were available. Also Citi analysts raised their estimates for the company, saying that they see it as a good play heading into the next earnings report.

Fitbit

Fitbit’s guide may be conservative

Fitbit isn’t due to release its next earnings report until next month, but Citi analyst Stanley Kovler said in a report dated April 13 that he likes the current setup in light of the announcement about strong device sales and his study of rankings from App Annie. He believes these two bits of data support his belief that the wearable maker’s revenue guidance for the 2016 calendar year might end up being conservative. He expects Fitbit to beat management’s guidance for the first quarter and provide a positive outlook for the second quarter, which he said should send shares higher. This is interesting in light of the fact that the company’s guidance was so disappointing in the last earnings report.

The Citi analyst notes that the company did not execute well on the Blaze release or the transition from the Charge to the Alta. Management’s guidance for operating expenditures in the current year was another negative. However, Kovler is encouraged by Fitbit’s announcement about the sell-in of more than 2 million devices and said that it sets up for positive guidance for the second quarter and positive results for the first quarter.

Fitbit estimates raised

As a result, the analyst raised his first quarter revenue estimate from $430 million to $460 million and his earnings per share estimate from 1 cent to 4 cents. He’s now expecting 5.1 million device shipments, which is a 33% year over year increase. His new estimates put him far ahead of consensus at $435 million in sales and 4.8 million units. Also management guided for $420 million to $440 million in sales.

In addition to the positive news about device shipments, Kovler examined data from App Annie and said the data backs up his view that Fitbit is in the first phase of a “significant global expansion” into new markets. He’s expecting international sales to rise to 29% of total sales in the current calendar year, which is a slight increase from last year’s 26%.

Playing “out of favor tech”

The Citi analyst calls Fitbit “a relatively inexpensive way to play ‘Out of Favor Tech,'” based on analysis of his group of tech companies which saw their stock prices plunge over the last three to six months. He said the company is one of the least expensive in the group in terms of 2016 EV/sales, which is at 1.3 times and behind the group’s 2.5 times average.

Further, he’s looking for the wearables maker to move into its next growth phase, which includes international expansion. He added that after his industry discussions, he continues to believe that fitness bands and watches will make up most of wearables sales in the next three to five years. He also believes the Apple Watch is no threat to Fitbit’s devices and continues to rate the company as a Buy with a $30 per share price target.

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