Fitbit stock kept climbing on Wednesday as analysts weighed on in the company’s new products. The wearables maker unveiled the Flex 2, Charge 2 and new accessories to go along with them on Monday. Fitbit also rolled out new software features to its current products.
Fitbit to benefit from trend in wearables
Morgan Stanley analyst Jerry Liu and team expect the new products and software features to help Fitbit post strong fourth quarter results. They also believe the software updates will increase both adoption and engagement and expect fitness wearables to be popular in the upcoming holiday season, with Fitbit to be the main beneficiary.
The Flex 2 and Charge 2 are similar enough to the Blaze and Alta that they should go down well with consumers. One key difference is that the display on the Charge 2 is four times as large as the display on its predecessor. Also the bands can be changed out, and Fitbit has added a lot of new software features such as multi-sport and VO2 max tracking, explained Liu.
The Flex 2 is 30% smaller than its predecessor and now is swim-proof. The Blaze got new software features, accessories, and a new app called Adventures, which offers virtual tours of popular hiking trails which run through the app as the user takes steps. As expected, the Charge 2 and Flex 2 will begin shipping in September.
Fitbit increases personalization
Liu and team believe the greater personalization on Fitbit’s products will improve engagement and retention as the company now offers more accessories for the Blaze, Alta, Charge 2 and Flex 2. They expect the greater number of accessories to increase the wearable maker’s revenue per device and boost its margins gradually. The company also added support for more major branded third-party accessories such as Tory Burch, Vera Wang and Public School.
They add that other features such as Cardio Fitness, Guided Breathing Sessions and new clock faces enable users to personalize their devices even more.
Fitbit on track for a strong holiday season
We’re still months away from the holiday shopping season, but the Morgan Stanley team say that their checks suggest Fitbit is already on track to have a strong one. Best Buy’s domestic comparable sales beat estimates, and one of the key comments by management was strength in health and wearables, which of course was good news for Fitbit. In fact, Liu and team believe Fitbit is one of the main drivers of that strength, as it and Garmin both gained shelf space at the electronics retailer earlier this year.
They predict that the Charge 2 will be the most popular Fitbit product, and they still like the company’s stock based on its new products and expectations for a strong fourth quarter. They maintain their Overweight rating and $31 price target on Fitbit stock.
Shares of Fitbit rose more than 2% to as high as $15.80 during regular trading hours on Wednesday.
