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Fitbit's Chinese Threat Is Overblown, Research Says

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Fitbit's Chinese Threat Is Overblown, Research Says
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  • The share price of Fitbit Inc (NYSE: FIT) has declined 35.32 percent year-to-date, reaching a low of $27.86 on November 13.
  • Leerink’s Steven Wardell has reiterated an Outperform rating on the company, with a price target of $81.
  • Wardell expects the company to maintain its market leadership position in 2016, while generating unit growth of over 40 percent and high gross margins of 48 percent.

Analyst Steven Wardell believes that the recent pullback in the stock and any future volatility related to the lockup expiration in December offer an entry point ahead of strong quarters for the company.

Related Link: BofA Is Buying Fitbit Because Of These Three Reasons

“Our specialists believe that using wearables to manage fitness is a durable megatrend, not a fad, though the wearable form factors may multiply and vary over time,” Wardell said, while adding that the specialists also believe that buying decisions in this category are emotional decisions, rather than being determined by price alone.

This would help create “space for a premium brand to durably charge above-market prices,” and as long as Fitbit “continues to innovate and keep its brand promise to consumers it can avoid the commoditization that affects many other categories of consumer electronics,” the Leerink report stated.

In addition, Wardell believes that the threat of competition from Xiaomi, a China-based company, are overblown, given that specialists say that the “whole experience of software and community that Fitbit delivers which will be harder for lowmargin Xiaomi to replicate even if they sell devices with the same kinds of sensors.”

In fact, Xiaomi has had limited success in its home market in China, despite the large market size, as well as past success with smartphones.

Latest Ratings for FIT

DateFirmActionFromTo
Jan 2017CitigroupDowngradesNeutralSell
Dec 2016Deutsche BankDowngradesBuyHold
Nov 2016Pacific CrestUpgradesUnderweightSector Weight

View More Analyst Ratings for FIT
View the Latest Analyst Ratings

Posted-In: Leerink Steven WardellAnalyst Color Long Ideas Reiteration Top Stories Analyst Ratings Trading Ideas Best of Benzinga

 

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