Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

1 Reason Fitbit Shouldn't Be Afraid of Apple

By Evan Niu, CFA - Jun 23, 2015 at 8:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In theory, Fitbit stands to lose a lot if smartwatches start eating into sales of fitness trackers. Even though Apple will lead the smartwatch pack, Fitbit can rest easily.

Generally speaking, most companies don't like it when Apple ( AAPL -0.32% ) steps into their competitive ring, since the Mac maker has a propensity to disrupt the status quo and dominate new industries. The fitness-tracker market is extremely young, but it already faces some potential threats from the even younger smartwatch market, since smartwatches also include health and fitness tracking capabilities.

As Fitbit ( FIT ) leads the fitness-tracker pack with an estimated 85% market share, it stands to reason that it theoretically has a lot to lose if Apple Watch takes off. That may not be exactly the case.

There's very little customer overlap
The fact is that there will be very little overlap -- not only between the markets but also between the prospective customer bases.

Fitbit is targeting mainstream users who want to have greater access to their health and fitness data and hope that a small, wearable device will help get them motivated. It's true that Apple is also appealing to users with the Apple Watch, but with one important distinction: The Apple Watch requires an iPhone. For that reason, Fitbit's broad cross-platform support is a good defense, since the company plays nicely with Android, Windows Phone, desktop platforms, and iOS. The Apple Watch may appeal more to iPhone users, but the majority of the world's smartphones now run Android. That's allowed the company to grow its active user base to over 9.5 million as of the first quarter.

That's not the only way in which there's little overlap. Not including Fitbit's WiFi-connected smart scale, the pricing spectrum of its fitness trackers ranges from just $60 for the clip-on Zip to $250 for the Surge smartwatch. Apple Watch, on the other hand, ranges from $350 for the Sport to $17,000 for the Edition. Apple has talked about avoiding price umbrellas in the past, but it's extremely unlikely that the Mac maker will ever move downmarket enough to put that much direct pressure on Fitbit, especially since the Apple Watch is a multi-function device, while most of Fitbit's devices are single-purpose.

Even in terms of brand, Fitbit is a health-centric brand, while Apple is a premium lifestyle brand. Little overlap there.

What about Google Fit?
Google ( GOOG -0.58% )( GOOGL -0.60% ) has responded to Apple's Health app with Google Fit, its own version of a health-tracking app. That also means the coming onslaught of Android Wear smartwatches will plug into Google's platform directly. Fitbit has been working hard to broaden its platform into an expansive ecosystem, allowing third-party developers to use application programming interfaces and more.

In fact, Fitbit should technically be more concerned about Android Wear smartwatches than it should be about Apple, particularly since Android Wear devices will inevitably see rapid commoditization and pricing pressure as OEMs compete with each other, which will probably push the prices down closer to Fitbit territory.

The Apple Watch is undoubtedly a threat to Fitbit, but the risk isn't as great as you might think.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$164.77 (-0.32%) $0.53
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,821.03 (-0.60%) $-16.92
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,832.36 (-0.58%) $-16.68
Fitbit, Inc. Stock Quote
Fitbit, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.