Cowen Calls Fitbit's Outlook 'Conservative' Because Of This

• Fitbit Inc FIT shares have appreciated 26.82 percent over the past 6 months, from a low of $29.68 on June 18.
• Cowen’s John Kernan has maintained a Market Perform rating on the company, while raising the price target from $38 to $41.
• Kernan believes that the Q3 consensus expectations could prove to be conservative, given that they imply a meaning slowdown in year on year sales growth from the 1H15 levels.

Analyst John Kernan believes that Fitbit continues to be the leader in the wearables and digital fitness market, with Google Search Trends continuing to show over 100 percent year on year growth.

These trends are almost the same as those prior to 2Q15, “implying Fitbit searches are growing at a higher rate as trend data is being benchmarked against total Google searches,” Kernan mentioned.

The Cowen Consumer Tracker Survey also indicated that the use of the company’s apps and products during exercise continued at industry-leading levels.

According to the Cowen report, “FIT's new and highly visible marketing campaign includes TV commercials during televised sporting events, including the NBA Finals in June and numerous NFL games thus far this season.”

While acknowledging the lack of “any major gift-giving holiday” during Q3, Kernan stated that Fitbit has reported higher sales for Q3 than for Q2 over the past two years. The consensus expectations, however, imply the growth rate of devices sold would slow to +70 percent in Q3, from +145 percent in Q1 and +162 percent in Q2. The consensus forecasts also assume mostly flat ASPs.

Kernan also expects the Corporate Wellness momentum to continue for Fitbit, given the HIPAA compliance requirements.