Fitbit Inc fka FIT

[eastunder]

Wedbush Sees 'Long Runway' for Growth at Fitbit (FIT); Coverage Initiated at 'Outperform'

http://www.streetinsider.com/Analyst+Comments/Wedbush+Sees+Long+Runway+for+Growth+at+Fitbit+%28FIT%29%3B+Coverage+Initiated+at+Outperform/11723334.html

Wedbush initiated coverage on Fitbit (NYSE: FIT) with an Outperform rating and a price target of $18.00. Analyst Nick McKay said he sees a "long runway" for continued growth. He also thinks the company will overcome commoditization and innovation concerns.

McKay explained, "We believe that Fitbit shares are currently undervalued given a long runway remaining from an installed base perspective, as well as relatively untapped accessory, co-branding, and corporate wellness opportunities. We believe that these positive factors outweigh the risk of commoditization over the next few years and a seemingly slowing pace of technological innovation."

Discussing commoditization threat, the analyst said, "First, wearing a Fitbit sends a strong statement to one’s peers, while wearing a generic knock-off does not (at least not a positive message). Second, a large marketing budget has made “Fitbit” interchangeable with “fitness tracker” for many people, regardless of manufacturer. Third, because of this brand awareness, we believe that corporate wellness buyers will be more willing to buy Fitbit products than those of its peers. Finally, we believe that many consumers are willing to spend more on a product that relates to monitoring their health than on one that does not."

McKay added, "Our price target represents 12x our FY:17 earnings estimate of $1.50 and just over 1.10x our FY:17 revenue estimate of $3.15 billion. Given that Fitbit is already profitable and expects to grow earnings significantly in 2016, we think that a P/E multiple comfortably in the low double digits is justified. We expect shares to trade closer to our price target as positive quarterly results momentum continues and it makes tangible strides in its accessories and corporate wellness efforts."