Wedbush Downgrades Fitbit Ahead Of Q4 Print, Says Medtech Opportunity Priced Into Stock

Fitbit Inc FIT stock has risen steadily since the start of the new year — so much so that one analyst considers it fully matured.

The Analyst 

Wedbush analyst Michael Pachter downgraded Fitbit from Outperform to Neutral and maintained a $6.50 price target.

The Thesis

Fitbit has offered no insight into its medtech opportunity, Pachter said in the Friday downgrade note, adding that Wedbush sees promise in a collaboration with Alphabet Inc GOOGL GOOG.

“Importantly, we think Fitbit has a competitive advantage in health care, in that it is platform agnostic,” the analyst said.

“Fitbit works just as well with an Apple OS as with Android and Microsoft, and as an enterprise solution, offering compatibility with any platform is necessary. Furthermore, Fitbit’s partnership with Google, announced in April 2018, underscores its ability to truly compete with Apple at the highest level.”

By Pachter's estimates, Fitbit could report meaningful medtech contributions this year, and management could provide details before the third quarter.

“That said, we think what is currently known about the medtech opportunity is fully priced into Fitbit’s share price." 

Fitbit will report fourth-quarter results Wednesday, Feb. 27, and the analyst said he expects a beat with $564 million in revenue and earnings per share of 8 cents.

The performance should reflect rising average selling prices, as well as an expanding market share in both the fitness tracker and smartwatch markets, Pachter said. 

“We think Charge 3 was a popular gift-giving item this holiday, given its compelling price point and specs," the analyst said. 

“Additionally, we think Fitbit’s MedTech enterprise customers are leaning toward the Charge 3 as it is the most robust fitness tracker option available.”

Price Action

Fitbit shares were up 1.51 percent at $6.72 at the time of publication Friday. 

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Photo courtesy of Fitbit.