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2 Smartwatch Manufacturers Banking On Big Health

By MyWallSt Staff - Updated Oct 21, 2019 at 12:52PM

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The smartwatch market has exploded in recent years, and Fitbit and Apple are going head-to-head on the healthcare front.

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The smartwatch market was valued at $48.14 billion in 2018, and it is expected to reach $130.55 billion by 2024. One of the most intriguing uses for wearables right now is in healthcare and tracking, which is where companies will be putting their best efforts.

A smartwatch on a wrist.

Image source: Unsplash.

Apple (AAPL -0.44%) and Fitbit (FIT) are focusing on healthcare. Here are the steps the two companies are taking to bring their smartwatches into the health market. 

1. Apple

In Apple's most recent quarterly earnings back in July, wearables were surprising winners, with Apple Watch sales rising 50%. It is estimated that Apple holds roughly 50% of the market share for smartwatches, selling close to 15 million units in the third quarter of 2019. Considering the Apple Watch has only been around since 2015, it makes this feat of market dominance even more incredible.

One of the cornerstones of this rapid growth has been Apple's keen focus on the application of healthcare to the watch. This comes as no surprise, as Apple CEO Tim Cook himself boldly proclaimed in January that the iPhone maker's greatest contribution to mankind would be its health-related services.

Fast forward to 2019, and the Apple Watch Series 5 has electrocardiogram (ECG) functionalities to monitor heart health -- including the capability to spot cardiovascular irregularities -- menstrual cycle tracking, an app to monitor dangerous noise levels to protect users' hearing, stress-reducing breathing exercise apps, diabetes-aid apps to track sugar levels, and much more. Oh, and it also tells the time!

It is no secret that Apple wishes to incentivize its healthcare products, and the Apple Watch is at the forefront of this. In the beginning of October, private Medicare plan Devoted Health became the first healthcare provider to cover Apple Watch as a benefit, helping members pay for the cost of the device up to $150.

In an increasingly health-conscious world, Apple's budding Watch business may see substantial growth as its technology becomes more relevant to healthcare. Perhaps there may even come a time when the iPhone is a secondary product to the Apple Watch and its Health apps. With Apple making a massive push into the services industry, its Health segment may well be one of the company's key offerings.

2. Fitbit

Fitbit has also taken great strides in promoting the health capabilities of its products. However, unlike Apple, Fitbit has struggled to regain the dominance it once held over the smartwatch market. Back in 2014, Fitbit was the market leader in wearables, holding close to 45% of the market share, whereas now, an increase in competition and lack of innovation has left the fitness tracker manufacturer desperately clinging to around 6% market share.

Why is a focus on health so important then?

Bluntly put, Fitbit is not Apple. The company doesn't have the resources, brand power or diversity of Apple, and for all intents and purposes, Fitbit really just makes fitness trackers and, apart from a subscription health service, doesn't have a whole lot more to offer.

However, the health capabilities it does have are quite impressive. Fitbit pioneered fitness tracking in smartwatches, with its latest devices offering activity tracking of all kinds, exercise recognition reminders to move, and -- something the Apple Watch does not have -- sleep tracking. On top of this, it also offers optimized heart rate tracking to help users keep an eye on cardiovascular health.

If investors want a glimpse into the future plans of Fitbit, they need look no further than its recent agreement with the government of Singapore. This deal will allow Fitbit to provide fitness trackers to a potential market of hundreds of thousands in the city, with anyone who signs up for the company's paid premium health service, Fitbit Inspire, receiving a free smartwatch. With this deal, Fitbit is testing out a potential strategy that could help it build a large subscriber base, while Singapore looks to reduce the cost of healthcare.

Fitbit has a lot of ground to make up on Apple. The stock has underperformed all year, down 20%, but received a welcome boost in September when it jumped 23% following reports the company was considering taking itself private.

With the smartwatch market on the rise -- annual units sold are expected to reach 279 million by 2024, a growth of nearly 9% per year -- there is every chance Fitbit can get itself back in the game, with healthcare being its potential Hail Mary play.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Apple and Fitbit. Read our full disclosure policy here.

The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Apple and Fitbit. The Motley Fool has a disclosure policy.

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