Fitbit Inc Stock May Eventually Be a Buy After All
In August of last year, yours truly here commented that fitness tracker company Fitbit Inc (NYSE:FIT) was a lost cause by catering to the consumer fitness market, and would only survive if it pivoted to being a full-blown medical device company. The response from loyal owners of FIT stock was…colorful, explaining such a thing could never happen, nor did it need to.
I simply didn’t understand the potential of wearables, nor did I appreciate the power of the Fitbit brand. Here we are 15 months later, and the FIT stock price is 60% less than its value then.
Like I said….
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I’m not bringing up the commentary to gloat though (well, not much anyway). I’m bringing up to suggest that if you’ve put Fitbit on the shelf in the meantime, thinking it is indeed beyond salvaging, you might want to dust it off. See, slowly but surely it is becoming a medical device player, and that just might be enough to turn things around.
Fitbit Repositioning
For the record, my conclusion from August of 2016 was:
“Fitbits haven’t exactly cultivated an image that they’re anything more than high-tech novelties. If FIT stock can work past that stigma and establish itself as a medical-grade equipment maker, it may be able to carve out a nice piece of an upper-tier medical monitoring market. It may need to redesign the product, and then push it through the FDA’s 501k regulatory pathway for medical devices. It would be worth it, however.”
If nothing else, this kind of repositioning could have meant it didn’t have to face Apple Inc. (NASDAQ:AAPL) head-on in so many ways.
As was noted, there wasn’t a lot of enthusiasm for the idea at the time. That started to change later that year. In December, Fitbit teamed up with Medtronic plc. (NYSE:MDT) to integrate fitness trackers with glucose monitors. In January of this year, health insurer UnitedHealth Group Inc (NYSE:UNH) offered up to $1500 worth of medical expense credits to customers willing to use a Fitbit Charge 2. In June of this year, Fitbit announced it was developing a device that could detect sleep apnea.
None of these developments reclassifies FIT stock as a medical device manufacturer along the lines of Boston Scientific Corporation (NYSE:BSX) or Medtronic. Still, they all clearly point to a new way of thinking from Fitbit beyond its consumer-oriented shtick.
Fast forward to September. That’s when the FDA tapped Fitbit, Apple and Samsung Electronics Co Ltd (OTCMKTS:SSNLF) (and a few others) to be part of a pilot program that accelerates the development of personal healthcare technologies.
The end-goal is to let developers skip the usually-required regulatory hurdles. It’s a boon for Fitbit simply because it allows Fitbit to help set the very standards it must adhere to.
Now fast forward to this past week, when the company told the world it has been chosen as the first supplier of wearables to be used in the government-funded All of Us Research Program.
The program’s aim is to study how lifestyles, our environment and our biological makeups play a role in disease and healthiness for people living in the United States. The program itself may yield little fruit, but it speaks volumes that it positions Fitbit as the go-to data provider.
Bottom Line for FIT Stock
Don’t read too much into these special projects and initiatives. Fitbit’s bread and butter market is still individual, health-conscious consumers, and its core sales channel remains consumer-oriented retailers.
The foreseeable future fate of FIT stock still ultimately depends how well the company addresses those customers and how well it differentiates itself from Apple.
Nonetheless, every step towards the insurer-pay or institution-pay market is a step in the right direction. These companies have leverage that can inspire consistent usage of Fitbit’s fitness trackers, where the company has struggled to keep owners using them on their own.
The kicker: The relatively new Ionic, from Fitbit, has been hailed as more of a true fitness tracker than a smartwatch, and yet is a decent smartwatch in its own right.
And, as Laura Hoy recently noted, strong sales of the Ionic suggest this was the caliber of fitness tracker consumers have been waiting for.
It’s not a reason to buy FIT stock just yet, but it’s certainly a reason to keep it on your watchlist. The company is starting to figure out where the real money is in a world where Apple dominates the consumer market.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.
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