Between Christmas Eve and Christmas Day, Fitbit's (FIT) app surged 20 spots to briefly overtake Instagram and YouTube as the most downloaded free iOS app in America. The app slipped back to eighth place as of this writing, but it remains the most popular U.S. health and fitness app by a wide margin.

Source: Fitbit.

That big jump indicates that lots of people received Fitbit devices for Christmas, and seemingly confirms Morgan Stanley's previous report that distributors had been ordering more Fitbit devices through online channels since Black Friday. Pacific Crest also recently claimed that sales were "exploding", and that some retailers were struggling to keep its Charge HRs in stock. It also allayed some concerns that cheaper devices like Xiaomi's Mi Band and pricier smartwatches like the Apple (AAPL -0.47%) Watch could render Fitbit's devices obsolete.

But despite that good news, shares of Fitbit have remained flat over the past month and have declined more than 20% over the past three months. Should Fitbit investors consider the app's popularity to be a bullish catalyst for this stagnant stock?

Grains of salt
Before Fitbit investors celebrate, they should remember that Fitbit only rose to the top of the U.S. iOS charts. In China, a major market for the Mi Band and Apple Watch, Fitbit doesn't even rank among the top 100 free iOS apps according to app tracker App Annie. Fitbit also ranks lower in other key Western markets, like the U.K.

Last quarter, 66% of Fitbit's revenue came from the United States -- down from 77% a year earlier. The company also launched marketing campaigns in 20 countries in the second half of 2015 compared to just eight in 2014. If these trends continue, Fitbit's domestic app rankings will matter much less than its overseas ones. Investors should also remember that Fitbit's global market share in wearables slipped from 32.8% to 22.2% between the third quarters of 2014 and 2015 according to IDC. During that period, Apple's market share rose from nothing to 18.6%, while Xiaomi's share more than tripled from 5.7% to 17.4%.

Source: Apple.

Establishing a domestic lead on iOS is encouraging, but Fitbit also needs to dominate Android devices to succeed globally. App Annie reports that Fitbit is currently the most popular health and fitness app on Android, but it didn't experience a post-holiday surge comparable to that of its iOS counterpart. Looking ahead, Fitbit must also counter an expanding market of Android Wear devices and other Android-compatible wearables across all price tiers.

But is Fitbit's stock cheap?
Analysts currently expect Fitbit's earnings to improve 12% next year and 32% annually over the next five years. That forecast gives Fitbit a 5-year PEG ratio of 0.9. Since a PEG ratio under 1 is generally considered "cheap", Fitbit stock can be considered undervalued based on forward growth estimates.

However, investors need to keep an eye on Fitbit's gross margin, which fell from 54.7% to 47.9% between the third quarters of 2014 and 2015. That decline was caused by stronger sales of lower margin devices like the Charge, Charge HR, and Surge (79% of all sales) instead of higher margin ones like the Flex. However, bulk sales of higher margin devices through corporate wellness programs could boost bottom line growth.

But despite these potential catalysts, Fitbit still priced a secondary offering in November at $29, which let it sell three million new shares as existing shareholders dumped 14 million shares. The timing of that sale raises a serious question -- were insiders worried that Fitbit would face tough year-over-year comparisons next year after posting hot holiday sales in 2015? Or were they concerned that new wearable devices would saturate the market in 2016 and force Fitbit to lower its prices across the board?

The verdict: wait and see
In my opinion, investors shouldn't buy Fitbit stock based on its iOS holiday boost alone. That news tells us nothing about Fitbit's overseas growth, its growth on Android devices, or its ability to fend off aggressive challengers in 2016. Instead, investors should wait and see if Fitbit's fourth quarter earnings reflect this growth, and whether or not its new products can carve out a lasting niche market between cheap wearables and high-end smartwatches.