FitBit Already 'Priced Like The Winner'; Sterne Agee CRT Doesn't See Buy Thesis Right Now

• Fitbit, Inc. FIT has seen an almost 20 percent increase in its share price since mid-June, with a high of $51.64 on August 5.
• Rob Cihra of Sterne Agee CRT has initiated coverage of Fitbit with a Neutral rating and price target of $45.
• While the company is well positioned to benefit from various factors, Cihra expressed concern that the stock valuation already assumes the Fitbit is the “market winner.”

Analyst Rob Cihra believes that Fitbit is positioned to benefit from the first mover advantage, as well as a rapidly expanding user base, low average selling prices and the “potential to create a sustainable, high-value “platform” that goes well beyond devices.”

Near term demand for the company’s offerings appears to be “very strong” and Cihra expects more than 81 percent year on year increase in units in 2015, with more than 128 percent year on year increase in revenue.

For 2016, units are expected to increase over 37 percent year on year, with revenue increasing more than 37 percent year on year as well.

“Recent gross margin pressure has included FX and COGS/yield hit from new product launches, but we expect FIT’s premium market share and brand can ultimately sustain trends toward management’s long-term goal of 50 percent,” the Sterne Agee report stated.

While health and fitness has been the most popular application of the company’s devices so far, possibly because it is “the most natural application,” Cihra believes that there is potential for a wide range of advances, including various types of sensors, batteries and interconnectivity through different ecosystems.

However, all these are still potential applications and the stock is being valued as though Fitbit has “already won.”