Corporate Wellness Represents An 'Underappreciated Opportunity' For Fitbit

Retailing giant

recently announced it will subsidize Fitbit's Zip to all of its 335,000 employees, with upsell opportunities at the employee's own discretion. Commenting on the announcement, Brad Erickson of Pacific Crest, said that the deal alone will add $0.04 in earnings per share to Fitbit's earnings (while also accretive to gross margins), he is bullish on the stock for other reasons. According to Erickson, the corporate wellness market is "underappreciated" and represents less than 10 percent of Fitbit's total market, implying there is tremendous room for further growth. "With 151 million people insured in the United States alone, and that market likely penetrated below 10%, we believe Fitbit is best positioned to capitalize on similar deals going forward," Erickson wrote. "This could not only drive upside to numbers, but could also expand the multiple." Coinciding with the Target deal, Fitbit announced HIPAA (Health Insurance Portability and Accountability Act) completion for its enterprise software platform. The analyst further pointed out that this implies Fitbit is taking "proactive steps to add value" to its enterprise offering that could "broaden both the size and value" of the corporate wellness opportunity moving forward, while also "unlocking" adjacent enterprise health care opportunities. Bottom line, Erickson argued that Fitbit's opportunity in corporate wellness could result in upside to estimates and an expansion in the stock's multiple.