Why Fitbit Is On The 'SmartTrack' To Growth

• After trading above $40 on November 2, Fitbit Inc FIT shares have slumped 15 percent in the past one month
• Barclay’s Matthew McClintock maintained an Overweight rating on the company, with a price target of $49.
• A meeting with management indicated several areas of growth for the company, McClintock noted.

Barclay’s Global Technology, Media and Telecommunications conference was attended by Fitbit CFO Bill Zerella and VP of Investor Relations Brad Samson. Analyst Matthew McClintock said that new product launches offer potential for margin expansion.

Previously, Fitbit had struggled to reach target margin, with the almost simultaneous launch of three products proving to be a huge strain on the organization. McClintock added, however, that the company now has greater capacity to meet target costs for the new launches scheduled for 2016.

Management indicated that the new products will center on the fusion of fashion and technology and provide more biometric measures to the consumer. “FIT will also continue adding new capabilities on the software side such as its recent SmartTrack upgrade,” the Barclays report added.

McClintock commented, “We believe the company has a substantial opportunity to expand beyond the United States.” Fitbit has already gained market share in the UK and Australia, and has partnered with one of the largest retailers in China to increase its penetration in the Asian nation.

Although corporate wellness currently contributes only about 10 percent of the company’s sales, its HIPAA compliant capabilities and synergies with the consumer business “should render the corporate wellness business a pivotal driver of growth,” McClintock added.

Fitbit already has the largest wellness platform in the US, with 70 of the Fortune 500 companies and a significant number of SMEs. Growth in the corporate wellness business is also expected to boost gross margin.