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Why FitBit Inc. Stock Plunged Today

By Steve Symington - Jan 11, 2016 at 2:23PM

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Another analyst voiced concerns over the health of connected fitness company Monday.

What: Continuing last week's painful slide, shares of Fitbit Inc (FIT) plunged another 10.7% as of 11:30 a.m. Monday after an analyst weighed in with a negative note regarding the fitness technology specialist.

So what: Specifically, R.W. Baird analyst William Power significantly reduced the company's price target on Fitbit shares to $30 from $54, citing mounting concerns over the reception of its recently launched Blaze smartwatch.

For perspective, the reduction comes less than a week after Baird reiterated its "Outperform" rating on Fitbit stock with a $54 price target. At the time, Power acknowledged investors' concern over whether the new device could compete with rival devices like the Apple Watch, as well as a lack of updates at CES 2016 for its flagship Charge and Charge HR devices.

Now what: Though Fitbit's smartwatch might be cheaper than many alternatives, fellow Fool Andrew Tonner already pointed out that it suffers not only from a lack of actual smart watch features -- aside from its core fitness competencies, it only offers push notifications and music control -- but it has no app ecosystem to speak of. Adding to those concerns are increased headwinds from new market entrants like Under Armour (UAA -1.61%), which launched its own suite of Connected Fitness products at last week's show including a fitness band, smart scale, chest band, a new fitness app, and even a smart shoe.

At the same time, you might argue the bad news is already baked in; Fitbit stock has fallen more than 35% over the past five trading days, and it now sits below its $20 IPO price for the first time.

At risk of catching a falling knife, I think investors would be wise to wait until Fitbit offers perspective on its current situation with its quarterly report early next month. If it doesn't prove the naysayers wrong then, I fear Fitbit stock could have much further to fall from here.

Steve Symington owns shares of Apple and Under Armour. The Motley Fool owns shares of and recommends Apple and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$9.79 (-1.61%) $0.16
Fitbit, Inc. Stock Quote
Fitbit, Inc.
FIT
Apple Inc. Stock Quote
Apple Inc.
AAPL
$174.03 (-0.30%) $0.52

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