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Where Will Fitbit Be in 10 Years?

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Three writers weigh in on whether Fitbit has the stamina to last a decade.

Image source: Fitbit.

Fitbit (FIT) leads the wearable market, accounting for 27% of sales in 2015 according to a report from IDC. But whether the company can maintain a forefront position while facing resource-rich competitors such as Apple and Samsung is a question that surrounds the company and its stock performance.

With this in mind, we asked three of our contributing writers to give their take on how the market might shape up and where Fitbit will be 10 years from now. 

Daniel B. Kline: Fitbit has its business moving in the right direction, but ultimately, what makes it work now dooms it going forward.

The company offers relatively simple fitness trackers at lower price points than some of the all-in-one devices offered by competitors. The focused feature set, along with the attractive pricing, has made Fitbit enticing to consumers, driving Q1 2016 sales to $505 million, up from $337 million during the same period in the previous year. The company also increased its device sales to 4.8 million from 3.9 million in Q1 2015.

Those are great numbers, but it's hard to see the company continuing to deliver growth like this going forward. The problem is that Fitbit's greatest strengths -- its laser focus on fitness -- ultimately dooms it to irrelevance.

While higher-end wearables both cost too much and don't meet the needs of fitness users, that won't be the case forever. Eventually, core Fitbit features like heart rate monitoring and step-tracking will simply be absorbed into devices people already own. That will come partly from phones adding more health-related features, and from the higher-end wearable makers eventually getting it right.

No one is going to wear a full-service wearable watch and a Fitbit. Right now, the watches are too limited and expensive, which makes the fitness-focused devices more attractive. But that will change, and Fitbit's market will shrink to hardcore athletes. It's not a sustainable business, and the company doesn't have the resources to compete in the broader wearable market.

Keith Noonan: I agree with Dan that Fitbit doesn't look so hot over the long term, though I do think the significance of wearable tech being a category of accessories worn on the body might provide the company with the avenues it needs to avoid being eclipsed by larger competitors.

There's a personal element to selecting clothing that extends to smartwatches and fitness trackers; people care what brands they wear and what those brands say on an identity level. So, if Fitbit can maintain its cool factor, there's no reason it can't be a healthy company 10 years down the road. Unfortunately for Fitbit, staying synonymous with wearable fitness tracking and maintaining pricing strength and special attraction points for its products will be more of a challenge as new alternatives enter the market.

From an aesthetic standpoint, most fitness bands already have a good deal in common with each other, and an emphasis on being small and unobtrusive means there's not a lot of room to show off design or visual flair. Whether fitness trackers are mostly absorbed into smartwatches or not, the form factors for devices that track activity and wellness will probably see considerable variation and innovation over the next decade. If Fitbit leads in this area and delivers form innovation that resonates with consumers, that will help the company's staying power, but again, it's up against competitors with great design histories.

Software innovation is even more important to Fitbit's survival than staying at the head of the pack in terms of hardware designs. It's here that the company's larger competitors could enjoy an advantage that will prove to be the difference over the long term. Fitbit products currently have a strong social component, with people sharing exercise results in social media posts and around the proverbial water cooler, but that could shift. The fitness tracking platform that delivers the best software and social media integration has a good chance of winning market share, and my guess is that someone will come along with a take on the concept that displaces Fitbit in the next decade.

Jeremy BowmanI'll take the contrarian view and argue that Fitbit will still be alive and kicking 10 years from now.

It's already clear that reports of its demise have been exaggerated. The Apple Watch was supposed to send it into oblivion, but more than a year after Cupertino's first launch since the iPad, demand for Fitbit products has actually outpaced the Apple Watch. In fact, it didn't even affect sales of fitness trackers, a category Fitbit dominates with 80% share. 

It turns out, there's a real demand for fitness trackers, and it's easy to see why. While a techie or a high-spender might prefer an Apple Watch for $349, a person just interested in health monitoring is going to go with a Fitbit for $70. Imagine a baby boomer who wants to track his own step count and heart rate without other needless, high-tech functions.

It's easy to see how this market expands, especially considering our increasingly health-conscious society. Oral Roberts University may have been showing us the future when it mandated that all incoming freshmen wear a Fitbit earlier this year. It's easy to see such a policy spreading to other institutions, or to insurers or employers who may encourage or subsidize use of a fitness tracker. Working mostly through the consumer channel, the company has not even tapped the potential to sell through insurers or other corners of the healthcare market.

International also presents an opportunity, as 70% of sales still come from the U.S., and revenue more than doubled in Europe and Asia in its most recent quarter.

Like any device maker, Fitbit will have to innovate to survive and thrive, but it's a mistake to underestimate its market leadership. One potential model for the company could be Garmin. A decade ago, it was a GPS-maker about to be walloped by the smartphone revolution, but the company adapted and today it makes specialized watches and other products for activities like golfing and running as well as navigation tools for flying and boating. The stock has not been an overwhelming winner, but the company remains profitable with a dividend yield of 5%.

If fitness trackers get disrupted, there's no reason Fitbit can't do the same, and the market seems to be underestimating the opportunity, with a forward P/E under 10. 

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