SunTrust's Peck Sees Captivate Corporate Wellness Event As Potentially Pivotal For Fitbit

In a report issued Thursday, SunTrust’s Bob Peck and his team reiterated a Buy rating on Fitbit Inc FIT noting that (1) the payments business could increase stickiness and (2) the upcoming Captivate Corporate Wellness Event could prove pivotal for the company.

Last week, Fitbit closed the acquisition of a wearable payments technology from privately-held startup Coin. While 2016 isn't likely to see Fitbit products incorporate it, SunTrust believes the devices could incorporate NFC-enabled payments starting in 2017. As the firm has discussed in previous occasions, “churn has been a key investor concern, and adding the payments option likely should help improve the stickiness of the trackers.”

However, the analysts continued, Fitbit will mainly be “playing catch up” in the payment space, as the Apple Inc. AAPL Watch and several other Android-enabled watches already feature this option – although adoption has been limited.

SunTrust thinks Fitbit has the potential to evolve into an “end-to-end health & wellness solutions provider to enterprises and health insurers.”

The iDC estimates that the market for wearable could reach roughly $30 billion by 2020. However, “the health & wellness TAM could be materially larger,” pointing out that, according to George Washington University calculations, obesity direct medical costs linked to obesity in the U.S. alone stand around $190 billion, and most of them are absorbed by health insurers.

Thus, the analysts believe the employers and insurers-focused Captivate Event, to be held between in early June, “should enhance visibility” into the ROI the company can deliver.

“While it may be early, we think Fitbit can eventually generate dual hardware and services revenue streams, which would reduce its exposure to the vagaries of the device cycle,” Peck concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.