Oppenheimer Hits Fitbit With Outperform, Says Global Opportunity Just Beginning

• Fitbit Inc FIT shares have been heading south, and have lost 44 percent since January 4.
• Oppenheimer’s Andrew Uerkwitz initiated coverage of the company with an Outperform rating and a price target of $25.
• The company is poised to benefit from two trends that are in their very early stages, Uerkwitz stated.

While Fitbit is a leader in the wearables space, this market is only “just beginning,” analyst Andrew Uerkwitz said. He added that today’s lifestyle trackers currently had limited functionality, but may be seen as “a precursor to something much larger.”

Uerkwitz mentioned that Fitbit appeared to be “best positioned to take advantage of two trends that are very early in their technology evolution, adoption curve, and understanding: real-time analytics and digital health.” The company continues to be a leader in these “burgeoning markets,” given its hardware share, software platform, and brand.

There were no visible near-term risks of hardware being commoditized, the analyst commented. He expects the contribution of the company’s international operations to grow from 25 percent to 36 percent in 2016. This, along with a broadening product portfolio and modest margin leverage, would give time to “see that our longer-term thesis is playing out.”

Although Fitbit is often considered as “a one-hit wonder,” this is “very misunderstood.” The Oppenheimer report noted, “Fitness tracking, in our opinion, is just beginning, and the end game is real-time analytics for fitness and the next step in digital health. Meanwhile, we see positive catalysts that give us comfort and patience to see Fitbit through to the end game.”