David Seaburg Sees Long-Term Problems For Fitbit

On CNBC's Trading Nation, David Seaburg analyzed Fitbit Inc FIT. He believes that the stock is overvalued and that there is no way it can trade at its current price-to-earnings multiple in the long run, because of the negative trends for hardware companies.

Seaburg compared it with GoPro Inc GPRO, which after initial euphoria, that has set its P/E multiple at 42, pulled back and it is now trading at 20 times its earnings. Fitbit is trading at P/E 36.5 and its chart looks a lot like GoPro's chart. Seaburg expects Fitbit to post good Q3 and Q4 earnings because its guidance has been relatively low, but after that he expects the stock to trade like a hardware company.

When it comes to the growth of the hardware fitness business, Seaburg sees some red flags. He is concerned because Nike Inc NKE has announced that it is exiting its hardware business FuelBand and Under Armour Inc UA is investing $750 in software application, favoring software over hardware.

Seaburg explained that hardware companies like Garmin Ltd. GRMN and Apple Inc. AAPL are trading at 14 and 12 times earnings respectively and he believes that Fitbit is going to trade at the same multiple. He expects to see the growth problems after Q4 and he would be a seller after that.