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Last October, I wrote a Wall Street Daily article where I pegged Fitbit (FIT) as “The Globe’s Many Harmful Tech Stock.”

Cue growls of derision from the masses!

I was widely panned for talking negatively regarding Wall surface Street’s preferred wearable technology stock.

“Louis Basenese is unaware concerning Fitbit,” chimed one reader.

So be it. Since being clueless has never felt so good!

Fitbit’s stock is down an incredible 60 % since that time.

From its post-IPO highs, the wealth destruction is much more dreadful. Shares have actually plunged by 72 %.

Amazingly, one sell-side expert– SunTrust Robinson Humphrey’s Bob Peck– firmly insists the “dip” stands for a compelling acquiring opportunity.

As I’ll show you momentarily, he’s lost his mind and also all credibility. And also I hesitate that if you follow his lead, you’ll lose much more– your hard-earned money.

From First to Worst

There’s no question that Fitbit continues to be the dominant gamer in the wearable technology industry.

The firm offered 21.4 million tools in 2015, nearly double the quantity in 2014.

Remember, however, Fitbit timed its stock exchange launching perfectly– when its headline financials were off-the-charts impressive.

For circumstances, year-over-year sales tripled in the quarter before its June 2015 IPO.

But to keep its ballooning share rate as well as evaluation, the firm had to maintain placing up comparable numbers.

It’s simply not possible.

As I warned, Fitbit was predestined to deal with slowing development, reducing margins, and boosted competition, which would inevitably lead to its obsolescence.

And it’s all coming to pass. Take into consideration:

  • Slowing Growth: Fitbit currently anticipates sales to increase between 29 % as well as 34 % in 2016. That’s below 149 % in 2015 and also 175 % in 2014.
  • Shrinking Margins: On Fitbit’s last profits conference telephone call, the company exposed that its EPS projection for the initial quarter would be $0.00 to $0.02. Yet experts were expecting EPS of $0.23 each share. Why such a substantial detach? It’s down to expensive media promotions to attract new buyers, in addition to higher manufacturing costs.
  • Increased Competition: While Fitbit’s chart-topping market share goes over, it’s reducing– as well as rapidly. This is because of the outstanding growth of newbies in the area like Apple (AAPL) and also Xiaomi. There’s no method that Fitbit could turn around the trend, either. Not with Apple’s premium charm and performance. As well as not with Xiaomi supplying a gadget that tracks rest, steps, and heart rate for under $25. Fitbit’s comparable offering– the Charge HR– retails for $149.95.


From “Purchase, Acquire, Buy” to Bye, Bye, Bye

Despite these gale force headwinds, though, SunTrust’s Peck composed this on January 6 (while repeating his “Buy” rating, as well):

“While we acknowledge that the competitors statements and lockup expiration include risk worth, we assume the nearly added $1 billion of worth destruction in addition to this worst-case circumstance was exaggerated.”

Nope. On the other hand, in fact.

Since that note, Fitbit’s shares have actually declined one more 36 %, damaging one more $1.1 billion in value.

Undeterred, nonetheless, Peck is still pounding the table on the stock.

On February 23, he wrote:

“While financial investments might be uneven as FIT concentrates on growth of the nascent market globally, we proceed to believe there is a significant long-lasting possibility for the company to deliver health/fitness remedies to customers in addition to business as well as health insurers.”

Mr. Peck could care about the “long-term possibility” for Fitbit all he desires. It doesn’t exist. And also at this point, nor does his credibility.

Time for Some Truth Serum

The truth reveals the deadly defect in Fitbit’s business version: It has no recurring revenue.

Instead, the design counts on convincing existing individuals to keep updating, while bring in a growing number of “mainstream” clients to buy devices.

But there’s a real trouble below: The information reveals that roughly 50 % of Fitbit customers desert their tools within the first year.

And I understand why from individual experience.

I got 3 Fitbit tools for Christmas presents, including one for myself. Less compared to three months in, I barely use it. Neither do the various other two recipients. Why? Let me count the factors …

  • The novelty wears off.
  • The battery life isn’t really as robust as advertised.
  • Sleep monitoring is entirely undependable. By hand “dealing with” the information to suggest that I had not been actually resting, but in reality during my early morning devotional time or seeing a flick with my spouse, is annoying.
  • The heart rate keeping track of capacities are similarly suspect, based on my contrast after obtaining a close friend’s Garmin device with heart price surveillance. I’m not alone here, either, as there’s a class-action suit against Fitbit for failing to accurately determine heart prices. (I’m not part of it, as I’m not the litigious type).
  • The tool isn’t really water-proof. Every shower as well as hand-washing requires getting rid of the band simply to be safe.

I might take place. We’re not below for a product review.

Getting back to the investment angle and also perma-bull analyst, Peck …

Fitbit Adhering to Groupon and also Zynga in a Race to the Bottom

Since Fitbit went public in June 2015, he’s kept a “Buy” score on the stock the entire time.

And while his early rate targets of $50 (July 2015) as well as $52 (August 2015) appeared prescient, he’s been forced to repeatedly lower his targets since after that, lest he look completely absurd as he continues to inform financiers to purchase on the dips.

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Thankfully, however, not every analyst is being hoodwinked.

In addition to me, Journey Chowdhry of Global Equities Research study believes there’s 50 % more disadvantage to Fitbit’s stock. That would certainly recommend a share price of regarding $7.

“Slowly the market for single-purpose devices (fitness trackers) is going towards zero and there is absolutely nothing FIT can do to reverse the fad,” stated Chowdhry.


I advise you continuously avoid the stock. As well as if you have it currently, venture out while you can.

As I created before: “The Fitbit IPO is eerily much like the climate that came before the IPOs for Groupon (GRPN) and Zynga (ZNGA). Each went public at the peak of their corresponding industries. And also while very early investors and also proprietors succeeded, both stocks confirmed to be devastating investments for daily capitalists.”

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Almost 300 days after the company’s IPO, there’s no turned downing for Fitbit is on specifically the exact same path.