Fitbit (FIT) shares shot 13.5% higher last week, soaring after Citron Research's Andrew Left put out a surprisingly bullish report on the the stock. The indictment later in the week of several Fitbit employees accused of possessing a rival's trade secrets wasn't enough to crash the party. Fitbit stock hit new 52-week highs, soaring 60% since bottoming out two months ago.
Citron's bullish report set a price target of $15 on the stock, a move that would find the shares more than doubling even after last week's surge. Left feels that the leading maker of fitness wristbands is being undervalued as the medical technology that's making waves outside of its currently struggling activity trackers. As Fitbit develops ways to monitor everything from heart disease to diabetes to sleep apnea, there are a lot of ways for the suddenly spiking company to turn things around. Left also points to Fitbit's strong cash position, as its balance sheet is backed by more than $3 a share in debt-free cash. In short, Fitbit has the means to keep reinventing itself.
Image source: Fitbit.
Bad to the Jawbone
The one thing that seemed to initially trip up Fitbit late last week was news that six former and current Fitbit employees were charged in a federal indictment for possessing Jawbone trade secretes. The act violates the confidentiality agreements that all six had signed when they previously worked at Jawbone.
The legal fisticuffs have been going on for some time, and Fitbit investors caught a break in that the company was meeting with analysts at Craig-Hallum on Thursday, just as the news was breaking. Craig-Hallum was able to put out a bullish note, addressing the matter. Craig-Hallum analyst Alex Fuhrman would go on to write that this isn't as problematic as it may seem since Jawbone settled with Fitbit last year -- just as Jawbone was going out of business -- after a court ruled that none of the improperly acquire trade secrets were used in eventual Fitbit products.
When the stock was cascading, it seems as if there was no morsel of good news that could break its fall. Now that the shares are surging it seems as if the kind of development that would trip up the stock isn't enough to crash the bullish party.
Fitbit is still far from perfect. It is years away from profitability, and revenue continues to go the wrong way. However, between the recent success of Fitbit's cheaper smartwatches and investors now looking for the next bullish catalyst to happen, sentiment is on the side of the bulls for a change.
Whether any of the potential partnerships or tech-med initiatives pay off or Fitbit reemerges as a buyout candidate, the one thing that is clear is that momentum is with the bulls. The stock has come a long way since bottoming out below $5 in April, but it still has a long way to go before it can shake its tag as a broken IPO.
