FitBit Quick Analysis

Sigh. I feel like I haven’t written about specific companies for so long that this doesn’t even feel like an investment or money blog like that (even though it’s never been purely that). I’m working on something fairly significant on the business end, so coupled with everything else on my plate it’s largely made it where I’m not doing much investing at the moment. However, I was forced to look at FitBit for a friend of mine and decided that I might as well talk about them to illustrate some larger points with investing in companies.

My summary of Fitbit, which I gathered in less than 15 minutes and could’ve just told my friend in one tweet/text was “Nah. Don’t do it.” The reason I’m writing it out though, is that the problems with Fitbit are similar enough and common enough that it will be useful to recognize them in a heart beat.

Fitbit’s biggest problem is that it has one game. It’s a one trick pony. Wearable/fitness tech, and that’s it. It’s the same issue with GoPro and increasingly the same issue with Apple. Their business is dominated by one product line. Apple is lucky that theirs is a high margin, high demand product but it’s still an issue. With Fitbit, smart wearables quickly went from innovative to commodified in a heart beat, leaving them holding a bag that increasingly has nothing in it. Yes, they made over a billion in revenue, and grew earnings over 40% but with every earnings report, it becomes more and more apparent that that game is done and they increasingly have nothing to offer.

It’s why they increased their spending on Research and Development from $50 million+ last year to over $150m in 2015. It’s why they grew revenues almost 150% but free cash flow only grew by 33%. It’s why their quarterly income fell from $48 million in Q2 last year to $11 million this year, and $18m to $6m in Q3 15 and Q3 16.

There are easier ways to spend your money that to invest it in Fitbit. Gather it in a pile, set it ablaze and bask in the warmth this winter. It may be a faster way to destroy it, but to me that’s a good thing cos you’re not wasting precious energy tracking a stock that as far as I’m concerned is going nowhere.

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