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Why Fitbit Shares Are 'Exploding'

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Fitbit Inc (NYSE: FIT)'s holiday sales are exploding. Analysts at Pacific Crest Securities say they "would be buyers" of the stock because of pessimistic sentiment, CES coming up and continuing trends in the corporate wellness market.

Shares of Fitbit are up more than 4 percent on Monday on the back of the firm's latest report.

Pacific Crest's Brad Erickson reiterated an Overweight rating on the company, and a $47 price target. Erickson noted that Fitbit's "in-store demand came back in a big way since our Black Friday checks indicated disappointing sell-through a few weeks ago," and said he expects the company to beat Q4 expectations.

'Exploding'

Pacific Crest dug into why Fitbit's shares have been -- in Erickson's words -- "exploding" this month. One-third of Best Buy Co Inc (NYSE: BBY) stores are reportedly "struggling" to meet demand for Fitbit's Change HR devices, and according to the analyst, sell-through run rates have doubled this month versus November, leading an inventory drop.

Of note, the company's post-black Friday checks have also significantly improved.

"Fitbit has seen 30 percent to 40 percent of its sales online on an annual basis, meaning that 50 percent or higher in the gift-giving holiday quarter was plausible. We are obviously encouraged by seeing in-store demand come back so strongly as a proxy for overall demand, " Erickson added.

He also commented on one macro trend expected to give Fitbit a solid floor: corporate wellness. "While bears will continue to latch on to the likely longer-term headwinds for the consumer business," he wrote, "we note that corporate wellness is a huge and growing opportunity for which Fitbit is in the lead, and this remains heavily discounted by most investors we talk to."

Latest Ratings for BBY

DateFirmActionFromTo
Mar 2021CitigroupInitiates Coverage OnSell
Feb 2021RBC CapitalMaintainsSector Perform
Feb 2021Morgan StanleyMaintainsEqual-Weight

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