Fitbit's Purchase Of Pebbles May Have Been A Good Move, But Organic Growth Issues Still A Concern

Following Fitbit Inc's FIT announcement concerning the acquisition of Pebble, Barclays said it remains somewhat skeptical of Fitbit's organic growth and efficacy of its prior investments.

Analyst Matthew McClintock noted that the company acquired assets, including key personnel and intellectual property from Pebble, though hardware products were excluded. Pebble is expected to cease all manufacturing and selling operations, the analyst added.

Fitbit didn't disclose the acquisition price or details of outstanding debt, if any, of Pebble.

Barclays highlighted on some unique selling propositions of Pebble products, including long battery life (7-10 days compared to five days for Fitbit's Blaze) and water-resistant attribute of all Pebble smartwatches. Although Fitbit's Flex 2 has water-resistant attribute, the firm said it has fewer capabilities than Pebble products.

While Barclays made note of Fitbit's R&D investments, which tripled in 2015 as it added engineers in both hardware and software divisions, it's also concerned because of the headwinds facing the wearables market, specifically the smartwatches. IDC's estimates released recently showed a 51.6 percent year-over-year plunge in third quarter smartwatch shipments.

Barclays has an Equal-Weight rating and a $10 price target on shares of Fitbit.

In pre-market trading, shares of Fitbit were down 1.25 percent at $7.87.