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Analyst: Fitbit Stepping In Right Direction, But Qualms Continue

Analyst: Fitbit Stepping In Right Direction, But Qualms Continue
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Fitbit Inc (NYSE: FIT), the maker of wireless and wearable tech that tracks how much exercise and sleep you get, is jogging in the right direction toward financial health, but concerns remain, an analyst said Thursday.

Deutsche Bank’s Sherri Scribner said a second-quarter beat modestly raised 2017 guidance because of a cleaner inventory channel, improved mix and increased cost discipline.

“In our view, F2Q-17 was a step in the right direction, but challenges remain and there is still uncertainty about FIT's ability to gain share in the smartwatch category later this year,” she wrote in an analyst note. “We continue to take a wait-and-see stance on the shares and view a Hold rating as the most prudent at this time given risk/reward is largely balanced at current valuations.”

Besides maintaining a Hold rating, she lowered the target price by a dollar to $5.50. Shares closed Wednesday at $5.07 and were up nearly 5 percent at $5.32 in pre-market trading Thursday.

Related link: Analyst: Garmin’s Strong Q2 Has ‘Mixed’ Readthrough For Fitbit

Lingering Concerns

“While news that FIT's smartwatch product is on track for a pre-holiday 2017 release is encouraging, the device is still on-the-come with no firm orders,” she wrote.

Lifestyle tech can have iffy results, and the jury is out on Fitbit’s future. Still, Scribner liked the demand for the company’s wearables and its second-quarter beat.

“Due to better-than-expected demand, FIT was able to work down a substantial portion of its excess channel inventory in F2Q-17, a major headwind to results over the past 3 quarters,” she wrote.

At time of publication, shares were up 10.26 percent at $5.59.

Latest Ratings for FIT

May 2018Bank of AmericaMaintainsUnderperformUnderperform
Apr 2018DA DavidsonInitiates Coverage OnNeutral
Apr 2018Morgan StanleyDowngradesEqual-WeightUnderweight

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