Fitbit (FIT, Financial) has been in a downtrend for quite a while, however it now looks like the stock may have bottomed and is ready to move higher. Fitbit is the market leader in a booming space, making the company’s long-term prospects look bright at these levels.
No Need to Worry
Currently, Fitbit is the unquestionable leader of activity monitoring bracelets. The company sold approximately 21.4 million of these connected devices in 2015, long before the 2 million smart-watches it shipped this year.
During the prior six months, Fitbit Blaze has been a significant contributor to the company’s 48% revenue growth. However, it can be certainly said that Blaze is not the top driver of the gradually rising company.
The primary reason behind the company’s business growth is its fitness tracker, and it is not likely that the Apple Watch (AAPL, Financial) will hurt Fitbit's sales in any way. Fitbit is safe just because of the size on the addressable market, as it design products that are compatible with Android smartphones. As a matter of fact, a majority of consumers prefer Android smartphones over iPhones, which is why I expect Fitbit to continue reporting strong growth.
Fitbit’s Most Awaited New Products
Despite the escalating revenue, the company’s sales growth has been declining gradually for quite some time. Earlier this week, Fitbit revealed its most awaited products, Charge 2 and Flex 2. The company believes that both the devices are well designed to appeal to consumers.
Fitbit’s Charge 2 is comprised of various noteworthy changes. Most important is the screen size, as it four times the screen size of the original Charge. Moreover, the company has added a multisport mode in the Charge 2 that will permit users to track actions apart from running, like cycling.
The Charge 2 will be available in the market for around $150 with a sleeker design. It also includes a guided breathing relaxation mode as well as adapted cardio fitness monitoring. On the other hand, Fitbit’s other new device, Flex 2, is 30% smaller compared to the first model of the Flex.
Moreover, it is the company’s first device that is water resistant up to 50 meters. However, it still uses the identical five-LED light tracking system, but now, the tracker can be detached and placed into other bands. Fitbit’s Flex 2 is priced at $100, and can be connected to smartphone via Bluetooth. Most significantly, it will allow the user to receive text and call notifications.
The new products should boost Fitbit’s revenue. Although it is obvious that the company’s sales growth rate will eventually slow down, it is still growing at a rapid pace in a booming market.
Conclusion
Due to the reasons mentioned above, Fitbit looks to be on the cusp of a breakout. With the company reporting strong growth and launching new products, I think Fitbit is a great stock to buy for the short as well as the long term.
Disclosure: No Position
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