Brocker.Org: Why Fitbit Soared Thursday


San Francisco-based wearable technology company Fitbit Inc. (FIT) saw its shares close up more than 12% on Thursday, though they cooled off Friday morning, trading down about 3.8%.

While investors applauded a first-quarter top line and bottom line beat from the activity tracker and fitness product company, analysts were more focused on management’s strategic plans for the upcoming period. Particularly, Fitbit said it is working down inventory of fitness trackers and making way for new models this year.

Debut of First Smartwatch

Analysts expect the future of Fitbit to rely largely upon the debut of its first smartwatch, although Fitbit offered few specifics. Fitbit and watchmaker Fossil Group Inc. (FOSL) have both taken a beating as new technology renders their old products unexciting and obsolete for a tech-savvy Millennials.

Analyst Tavis McCourt of Raymond James, who’s given Fitbit an outperform rating and $9 price target, says the company is “on track” to work down channel inventory, yet its “sustainable growth will depend on success of the company’s launch into the smartwatch category beginning later this year, which appears to be on track as well.” Dougherty & Co.’s Charles Anderson, who has a neutral rating on FIT, also weighed in with more of a bearish outlook, suggesting that the possible gain from new Fitbit costumers will be balanced out by the risk of the saturated activity tracker market. (See also: What Fitbit Is Touting About Its Slim New Alta HR.)

Trading at a price of $6.11 on Friday morning, shares of Fitbit reflect an approximate 56.1% decline in the 12-month period. (See also: Can Fitbit Revamp With New ‘Coaching’ Focus?)