Fitbit (FIT) released a number of updates and new additions to its product line Wednesday. The company announced the release of the Versa Lite, Inspire and Ace 2, as well as a slew of new accessories to go along with their smartwatches. Expectations remain high for the company after recently posting another strong quarter.
Roth Capital analyst Scott Searle remains bullish on the stock, maintaining his Buy rating and $8 price target, which implies about 40% upside from current levels. (To watch the Searle’s track record, click here)
Perhaps the most important new product is the Versa Lite. Searle says this new product, which will be available in two weeks, “lowers the entry threshold for smartwatches” as it will retail for $160. The analyst believes “this segment [smartwatches <$200) will continue to be a key driver of growth in the 45M unit smartwatch market…[while also continuing] to drive incremental Fitbit share from ~12% in 4Q18 to 15-20% over the next two years.”
While the Versa Lite may have been the most notable new product, Searle is excited about Fitbit’s formal announcement of “the healthcare focused Inspire and Inspire HR tracker.” The analyst believes the products “will drive the growth in Healthcare solutions including potentially software and Fitbit Care opportunities.” As FitBit has relationships with more than 100 healthcare providers, Searle says, “Inspire HR devices could be subsidized or given away through healthcare channel partners.”
Searle believes the healthcare track is an important route for FitBit. He says, “continued growth of trackers through these channels drives better outcomes and lower healthcare costs, as well as feeds the data flywheel for other digital therapeutic monetization opportunities such as the treatment of chronic conditions such as diabetes, hypertension, arrhythmia, sleep apnea, etc. Combined with the Ace 2, these trackers will continue to help stabilize the category and maintain industry leading share, in our opinion.”
While the company issued decline average selling prices (ASPs) in its guidance last week, Searle says “these new product introductions…clarify” the decline. The analyst expects “these product extensions to drive incremental share (smartwatches) and drive [gross margin] expansion,” while expecting this year to be FitBit’s first growth year since 2016.
FitBit is a relatively small company compared to other publicly traded companies, even as it is widely known as a popular consumer product. Fitbit’s market cap is valued at $1.5 billion and has an average trading volume (3 month) of less than 5 million shares per day. Over the past three months, TipRanks analysis shows only three analyst rating on the company, including two Buy ratings and one Hold rating. The average price target among these analysts stand at $7.17, representing a 25% upside from where FIT stock is currently trading. (Get TipRanks’ free stock analysis report on FIT)