Bob Peck: Fitbit's Problem Is Macro, Not Fundamentals

• Fitbit Inc FIT shares have declined 37.6 percent over the past three months, touching a low of $27.86 on November 13.
• Robert S. Peck of SunTrust Robinson Humphrey has maintained a Buy rating on the company, while lowering the price target from $52 to $48.
• Peck believes that the stock has been affected in recent times by macro and broader industry-related concerns, rather than Fitbit’s fundamentals.

Analyst Robert Peck explained that there were non-company specific concerns that have pressured the stock, such as key traditional retailers providing disappointing updates, competition from Xiaomi, the acquisition of Misfit, among others.

Peck also mentioned that investors discussed various core fundamental drivers at Fitbit’s roadshow, such as “1) negligible impact from iWatch; 2) gross margins stable; 3) inventory ramped for big 4Q; 4) new products on schedule for next year; 5) Jawbone litigation update; 6) new corporate wellness partners; and 7) M&A possibilities.”

Peck believes that all these issues are unchanged and positive for the company, while mentioning that it was a wise move for Fitbit to go ahead with selling its shares, although the number of shares sold was brought down for the earlier 7 million to 3 million.

With this sales, the company was able to $80 million, which Peck believes could be used for M&A. Fitbit also managed to lock top shareholders for another 90 days, while its float has increased 40 percent.

The sale also gives the company “new long term shareholders,” while easing “any pressure for the December lockup expiration.”

Peck believes that the 2016 expectations for the company could prove conservative, given Fitbit’s catalysts and traction.