Analyst Upgrades Fitbit Ahead Of Push Into MedTech Space

Fitness tracker Fitbit Inc FIT's announcement it will enter the health care and medical technology space is a bullish catalyst for the stock.

The Analyst

Wedbush analysts led by Michael Pachter upgraded Fitbit from Neutral to Outperform with an unchanged $6.50 price target.

The Thesis

Fitbit on Sept. 19 launched a new connected health platform called Fitbit Care, which combines health coaching and virtual care through a new app. The new massive opportunity marks a reversal from the company's earlier reputation as being a "one-trick pony" that focuses only on fitness trackers.

The analysts said Fitbit's decision to work directly with employers, health plans and health systems creates a win-win scenario. The company should see higher device sales along with a recurring subscription stream for the app. Meanwhile, the cost-benefit tradeoff for employers and health plans are likely to be favorable as it could push insurance premiums lower and encourage workers to live a healthier life which in turn improves work productivity.

Fitbit isn't ignoring its roots and its new Charge 3 watch is likely to be a winner in the upcoming holiday shopping season, the Wedbush note said, especially among the new medtech enterprise customer segment given a more favorable price point versus the competition.

The new recurring revenue stream justifies a bullish stance on the stock.

Price Action

Shares of Fitbit were trading higher by more than 4 percent to $4.70 at time of publication.

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