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Morgan Stanley Stays Bearish On Fitbit After Apple Watch Unveil, Says Revenue Is The Real Concern

Morgan Stanley Stays Bearish On Fitbit After Apple Watch Unveil, Says Revenue Is The Real Concern
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Fitbit's Significant Advantage Over The Apple Watch (Seeking Alpha)

Apple Inc. (NASDAQ: AAPL)'s launch of the Series 4 Apple Watch, with features that include a built-in heart monitor, sent shares of rival smartwatch manufacturer Fitbit Inc (NYSE: FIT) down by about 7 percent Wednesday.

The Analyst

Morgan Stanley analyst Yuuji Anderson maintained an Underweight rating on Fibit with a $4 price target.

The Thesis

Fitbit's  stock reaction to Apple's launch largely reflected concerns over the pace of software and sensor improvements in the Fitbit ecosystem, Anderson said in a Thursday note. (See the analyst's track record here.) 

The Apple Watch 4 has sensors and an app to detect atrial fibrillation — one of many health and wellness use cases Fitbit is also pursuing, the analyst said. 

Fitbit's newest products Versa, at $200, and Charge 3, at $150, address lower price points, Anderson said. 

Morgan Stanley's below-consensus estimates for Fitbit show concerns that the "health and fitness functionalities between the Versa and Charge 3 are not sufficiently differentiated to avoid cannibalization."

Aggregate demand will not sufficiently offset declines in legacy products exiting 2018, Anderson said. 

Continued revenue declines with lower-priced products will drag Fitbit shares down toward Morgan Stanley's price target, the analyst said.

The Price Action

Fitbit shares have lost about 3.2 percent year-to-date.

Related Links:

How The Tariff Threats Could Impact Smartwatches

This Day In Market History: Fitbit IPO

Photo courtesy of Fitbit. 

Latest Ratings for FIT

Aug 2018Bank of AmericaMaintainsUnderperformUnderperform
Aug 2018WedbushMaintainsNeutralNeutral
Aug 2018Stifel NicolausMaintainsHoldHold

View More Analyst Ratings for FIT
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Yuuji AndersonAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


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