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Roth Capital Shares Two Cents on Fitbit (FIT) Following Departure of CFO Bill Zerella

Roth Capital's Scott Searle continues to bet on FIT, enticed by the company's potential with its Versa smartwatches.


Though Fitbit Inc (NYSE:FIT) revealed a week ago CFO Bill Zerella is walking out of the fitness tracking giant’s doors, CAO (and previous CFO at Nanometrics) Ron Kisling is set to step into Zerella’s shoes.

Roth Capital analyst Scott Searle continues to be encouraged on Fitbit’s bigger picture, especially with last week’s reveal of a “record” 1 million Versa smartwatch units shipped in its opening 7 weeks. Glancing ahead to the end of this quarter, the analyst believes Versa is tracking to post over roughly 1.5 million units and reap around $200 million in sales against his total sales forecast of $282 million.

Yet, Searle acknowledges this to be a “surprise move” for a leader who played such an influential role in achieving “financial discipline and a digital healthcare focus to Fitbit.” Zerella has a standout track record in being a “driving” force behind opening the window to the digital therapeutics model.

For context, Zerella successfully guided FIT once it made its first footsteps from “fitness tracker hypergrowth.” It is quite a positive legacy for Zerella to leave behind, establishing FIT “on solid fundamental footing” even following his departure, indicates Searle.  Moving forward, the analyst cheers, “Versa drives positive outlook” for the company.

Searle continues, “We note that the Versa addresses a key $200 ASP and mid-tier market segment that was previously not addressed by the company. Additionally, the company continues to drive incremental engagement with smartwatches and highlighted female health tracking features that now have 2.4M users. We believe this underscores the power of the Fitbit digital engagement and, ultimately, monetization model. Overall, we believe that Fitbit remains on track to achieve our estimates of approx. 4M smartwatch units in 2018.”

Bottom line, “While it is never encouraging to see the departure of a key executive member, we believe that Fitbit remains on sound financial footing and is tracking, in-line to better, our smartwatch expectations. We believe that as new products and details related to the digital therapeutics model emerge in 2H that FIT can continue to trade higher,” concludes Searle.

Still sizing up a giant right “on track,” the analyst reiterates a Buy rating on FIT stock with an $8 price target, which implies a just under 20% upside from current levels. (To watch Searle’s track record, click here)

TipRanks suggests Wall Street is split between confident voices and the cautious, skeptical on this fitness tracking giant’s market potential down the line. Out of 6 analysts polled in the last 3 months, 3 are bullish on FIT stock, 2 remain sidelined, while 1 is bearish on the tech player. Yet, is the Street more skeptical than meets the eye? Consider that the 12-month average price target stands low at $6.92, marking nearly 9% in downside potential from where the stock is currently trading. In other words, pessimism seems to be baked into these analysts’ target expectations on FIT.