Stifel Cuts Fitbit's Target By Nearly 50%, But Is Still Bullish

• Fitbit Inc FIT shares have plummeted 40 percent since January 4, and are hovering close to their 52-week low.
• Stifel’s Jim Duffy maintained a Buy rating for the company, while reducing the price target from $60 to $35.
• While the company is poised for robust growth, investors seem to be waiting for the response to its new products before assigning a higher multiple, Duffy believes.

Analyst Jim Duffy mentioned that Fitbit is a leading digital health and fitness company whose fundamentals and future growth prospects remain bright. The price target has been revised downward to reflect multiple compressions in the market and the suppressed risk appetite of investors.

“Despite Fitbit’s market leadership position, strong fundamentals, and ongoing evidence of validation for both the digital fitness and corporate wellness categories, market forces telling us that investors are unwilling to reward FIT shares with a multiple for future growth,” Duffy wrote.

Fitbit is an early leader in a market which has a broad demographic appeal, the analyst pointed out, while adding that the company’s strong brand, social platform and margin structure can be leveraged for several years of strong growth and earnings power.

Duffy expects the market to wait for evidence of consumer appetite for Fitbit’s new products and uptake in international markets before they attribute the associated earnings power to its share price.

“With strong proof of market adoption of new products in 2016 (Blaze to launch late 1Q), we believe FIT shares could recapture multiple points in appreciation for the franchise sustainability and growth opportunities,” the Stifel report noted.