FitBit (FIT) Buying Opportunity

StockWatchIndex Update on FitBit (FIT) 
Considers Drop in Share Price a Buying Opportunity

SWI has originally added Fitbit  to its SWI Portfolio at an initial price of $30.40 in May of 2015 . We have been monitoring FitBit for the last few months, waiting for the earnings report before committing to a long position.

The shares fell 7% yesterday, closing at $40.80 ($37.15 after hours) based on  the announcement that lock-up restriction for employer shares have been released, which amounts to 2.3 million shares or 10% of common stock shares. The Company also announced a secondary offering Monday, with the company seeking to sell 7 million shares and investors proposing to sell 14 million shares.

Revenue and Earnings
While the Company reported net income of $45.8 million, or 19 cents per share, down from $68.9 million, or 34 cents in the year-earlier period, it reported adjusted earnings per share of 24 cents, above the FactSet consensus of 10 cents. The Company reported revenue of $409.3 million, up from $152.9 million in the year-earlier period and up from the FactSet consensus of $359.2 million. 

Fitbit issued fourth-quarter guidance of adjusted earnings per share between 20 cents to 25 cents and revenue between $620 million to $650 million. The FactSet consensus for the fourth quarter is adjusted EPS of 20 cents and $589.7 million for revenue. Fitbit issued fourth-quarter guidance of adjusted earnings per share between 20 cents to 25 cents and revenue between $620 million to $650 million. The FactSet consensus for the fourth quarter is adjusted EPS of 20 cents and $589.7 million for revenue. Many analysts have been cautiously optimistic about Fitbit's stock price forecast and predict a rise in FIT stock as the company is being more clear about its future growth.

Fitness Sector
While the wearable fitness sector seems to be crowded with (cheaper) competition, the enthusiasm with which U.S. consumers have adopted the wearable fitness device trend and focus on quality products is rising fast. According to market research firm Acquity Group, only 7% percent of consumer used a fitness tracking device in 2014 and projects that number to jump to 28% by 2016. With this market expanding as quickly as it is and Fitbit continuing to release new and complimentary products, it is well positioned to use its market-leading position to produce strong earnings and revenue results.

Rainer Poertner
Chief Analyst

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