Login | January 16, 2019

Fitbit stock

MALCOLM BERKO
Taking Stock

Published: January 8, 2019

Dear Mr. Berko: I'm going to buy my wife a $225 Fitbit watch for Christmas. I'm also looking at the stock, which sells for about $5 a share. Do you think buying 1,000 shares of the stock would be a good investment? -- CL, Springfield, Ill.

Dear CL: Fitbit (FIT-$5.30), during the summer of 2015, traded at over $50 a share! And the number of citizens who'd buy its products suggests that too many American consumers need a vaccine for stupidity. Morgan Stanley and Deutsche Bank, mindful of this folly, hurriedly took FIT public at $20 a share before the vaccine could be distributed to Walgreens and CVS. Fitbits -- like Tamagotchi, the Pet Rock, Silly Bandz, Elmo and Doggles -- join the parade of useless products that keep the American masses entertained.

FIT, hoping to post $1.5 billion in revenues this year, designs, manufactures and peddles wearable (clip-based or on one's wrist) fitness tracking devices. These sleek-looking gadgets, with matching software, measure and record how many steps you have taken, the number of calories you have burned and the distance you may have walked or jogged. Some Fitbits also monitor one's sleep duration, sleep quality and heart rate. Now that you have this heath data, what are you supposed to do with it?

Fitbits retail for $99 and higher. A neighbor told me she bought a Fitbit Blaze for $200. It has wireless syncing to hundreds of mobile devices, can play music, has email and texting capabilities, and can be connected to a GPS system. Fitbits' batteries last long, and the devices come in stylish designs and colors. These gizmos also retail in Europe, Latin America and Asia, suggesting that we're not the only gullible consumers on the planet.

I can't imagine how we Yanks made it through the Civil War, the Spanish-American War, two world wars, Korea, Vietnam and the Cold War without Fitbits. Frankly, I can't imagine how our forebears could drive their Conestoga wagons across the prairies and grasslands and then over the mountains to California without wearing sunglasses or sunscreen. We've spent all our lives without knowing our daily calorie intake, the number of steps we take between rising in the morning and retiring at night or our pulse rate when the stock market rises by 600 points. When you gift your spouse with that $225 Fitbit watch for Christmas, she'll be excited with this new toy and spend hours reading the 40-page instruction manual. Then she'll stop wearing her designer watch, strap on her Fitbit and take it for a spin. But in a couple of weeks, if your wife is like most spouses, the designer watch will be back on her wrist, and the Fitbit will be packed back in its box and stored in a dresser drawer. And that's probably where 82 to 86 percent of the Fitbits sold since 2014 are found today. There should be a fluid market for used Fitbits.

FIT has big-name competition -- Garmin, Huawei, Mobvoi and Skagen, with Apple and Samsung in the higher end of the smartwatch competition. Apple's Series 4 generation of products suggests that FIT has a lot of work to do just to maintain its position in this industry.

This year, FIT's 1,700 employees should enable the company to report $1.5 billion in revenues, a little less than the $1.6 billion it posted last year, which was less than the $2.1 billion it had in 2016. And FIT lost money in each of those years. Management is more sanguine about 2019 and expects revenues of $1.65 billion, but truth be told, FIT may also end next year with a loss.

Go ahead and buy the watch. It will be a fun conversation piece for several weeks. But don't buy the stock, which wouldn't be a fun conversation piece after dropping in value.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


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