Scaling International May Be 1 Of The Next Meaningful Catalysts For Fitbit Investors

Fitbit Inc FIT's stock was trading higher by more than 2 percent Tuesday morning following a bullish report by analysts at Longbow Research.

Longbow's Joe Wittine cited Fitbit's international opportunity in his research report, specifically the "Core-5 countries" in Europe (Germany, France, Spain, Italy, U.K.), Asia (China, Australia, India, Japan, Korea) and the Americas (Canada, Brazil, Mexico, Argentina, Chile). The analyst noted that these key growth markets will "line up nicely" with Fitbit's acceleration plans at a time when a few of its large and established markets, such as the United States, will face "law-of-large number deceleration."

Core-5

Wittine's international opportunity is capped at the individual country's iPhone (Apple Inc. AAPL) market share seeing as how Fitbit is viewed as a similar higher-priced brand.

Wittine continued that Fitbit's opportunity in the three separate "Core-5" groups could be as high as 109 million incremental units. In the near term, the analyst believes these countries could generate 17 million incremental units of sale for Fitbit.

Related Link: Fitbit On Competition: Big Difference Between "Barriers To Entry" And "Barriers To Success"

Wittine added that China remains "far-and-away" the company's biggest potential driver of growth, given the estimated 800 million smartphones in the market and iPhone's estimated 18 percent take in the country.

In addition to Fitbit's international opportunity, the company's product cycle — mainly Charge 2 and a presumed Surge 2 in 2017 — is another reason to be bullish.

Bottom line, Fitbit's sub-11x 2017 P/E ratio "remains fair disconnected" from the company's growth profile.

Wittine maintains a Buy rating on Fitbit's stock with an unchanged $20 price target. The analyst also boosted his 2017 earnings per share estimate by two cents to $1.40 on higher than previously expected shipment growth.

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