Fitbit Invests in Medtech Start-Up

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For the first time in its 11-year history, Fitbit (FIT) has made an investment in a start-up; a $6 million capital infusion into the blood-sugar monitoring company, Sano. Sano uses a small “patch”, containing tiny needles that barely prick the skin, to monitor glucose; marketed as a less painful approach to monitoring alternatives. The medtech product for diabetics has not yet received FDA approval, which may be required before it can be implemented in FIT devices and sold within the U.S.

Howie Long-Short: Apple (AAPL) is working on a glucose monitor that doesn’t break the skin, so marketing the product as a less painful approach to the alternatives would seem short-lived. Sano needs its patch to be the best way to monitor blood sugar levels on a consumer grade wearable; not just a less painful approach. If they can accomplish that, there would seem to be upside to the business; more than 100 million people in the United States are living with diabetes or pre-diabetes.

Fan Marino: In November, the National Institutes of Health purchased 10,000 FIT devices for their All of Us research program. The program seeks to capture biometric data across all demographics, eventually encompassing one million Americans; with the goal of accelerating research and improving health. Why did the NIH select FIT over AAPL? Their multi-day battery life!

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National Championship Game 1st to Require Mobile Entry

College Football Playoff

Nearly all fans attending tonight’s national championship game at Mercedes-Benz Stadium will use an Apple iOS (AAPL) or Android device to enter the stadium; as Ticketmaster, the official partner of College Football Playoff, will only be issuing paper tickets to a small number of VIPs. The all SEC contest is the first significant U.S. sporting event to require mobile entry; fans will not have the option to print their own tickets. Ticketmaster (LYV) said it’s using mobile ticketing to “increase the safety (i.e. counterfeiting) and convenience of the ticketing process” and to expedite “mobile entry for fans.” Fans without mobile devices will have the option of visiting the box office and having their ticket printed for them.

Howie Long-Short: Stubhub said that Ticketmaster mandating mobile ticketing for the game, has resulted in less inventory; but, TicketIQ is reporting that they’ve seen 2x the amount of inventory (from last year) in the 3 days leading up to the game. In 2017, Stubhub increased its fees 1.5% to 21.8% per transaction; nearly 3x (7.7%) more than parent company eBay (EBAY) charged its sellers. Perhaps that has something to do with why inventory is down.

Fan Marino: Georgia HC Kirby Smart was a long-time assistant under Nick Saban (Alabama, LSU, Dolphins), but guys on Saban’s coaching tree haven’t fared well against their former boss; Saban has won the last 11 meetings over former assistants (Fisher, Dantonio, Muschamp, McElwain, Dooley).

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Amazon Takes on The Sports World; 25 Companies That Will Be Affected

Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.

Amazon Expands Brand Registry Program, Now Includes Nike

In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.

Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD

Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).

Amazon Entering Private-Label Sportswear Business

In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).

Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477

Howie Long-ShortAMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.

The Pursuit of Exclusive Broadcast Rights

In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.

Names to Watch: CBS, DIS, FOXA, CMCSA, FB, GOOGL, NFLX, AAPL, SKYAY

Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.

Twitch: The Future of Game Broadcasts?

Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.

Names to Watch: CBS, DIS, FOXA, CMCSA, TWX, RCI, MSGN

Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.

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Adidas Takes Macro View, Competing with Netflix for Share of Wallet

Adidas Global Creative Director Paul Gaudio believes the company isn’t just competing with rival footwear and apparel manufacturers (i.e. NKEUAAPMMAF etc.), but with anyone “competing for share of wallet.” Gaudio’s premise assumes that consumers have a fixed budget for recreational purchases and weigh the value of a product not just against its immediate competitors, but against all other products under consideration prior to purchase. ADDYY isn’t the first company outside television and film to be threatened by the blue-chip company; in 2016 Darden (DRI) CEO Gene Lee said the restaurant industry was competing with what he calls today’s “new necessities” (including: smart phones and NFLX) for discretionary dollars. ADDYY reported a Q3 ’17 sales increase of 9% YOY (to $6.6 billion) and profit that increased 30% YOY (to $610 million).

Howie Long-Short: While I admire Mr. Gaudio’s macro view on consumer spending, U.S. consumer confidence remains near a 17 year high. Consumer confidence measures feelings about current and future economic conditions, with an optimistic consumer purchasing more goods and services. If consumer confidence remains high, NFLX isn’t a threat to ADDYY; however, if consumers begin to pull back the reigns on spending (should the economy falter) it’s reasonable to think they will begin asking if that new pair of NMDs is worth forgoing 12 months of binge watching.

Fan Marino: Kanye West got Kim Kardashian a portfolio of blue-chip stocks including; Disney (DIS), Apple (AAPL), Amazon (AMZN), Adidas (ADDYY) and Netflix (NFLX) for Christmas! The portfolio included; 920 shares of DIS (valued at +/-$98,500) and 955 shares of ADDYY (valued at +/- $96,500). That sure beats the luggage I got for Hanukkah as a 16-year-old. Thanks dad (eye roll).

Adidas considers Netflix as competition

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U.S. Wearables Market Struggles, UAA, ADDYY and ASCCF Focus on Software

The U.S. wearables market (i.e. smart watches, fitness trackers) has struggled to reach the mainstream, with less than 20% of adults expected to use wearable tech at least once/mo. in 2018. eMarketer projects wearable use will increase 11.9% YOY over the coming 12 months, but that growth percentage is down from 15.2% YOY in 2017 (and expected to slow to 7.7% in 2019). Smart watch sales will drive the increased usage, accounting for 55% of all wearables by 2022 (up from 21% in ’16). Not everyone is convinced wearables have reached peak growth though, IDC anticipates the number of devices shipped will double by 2021 (accounting for higher adoption rates in China) and CCS Insight anticipates wearables becoming a $34 billion industry by 2020.

Howie Long-Short: Under Armour (UAA) and Adidas (ADDYY) have both recently exited the wearable tech space. UAA announced in November it would no longer manufacture fitness trackers, instead building software to integrate with AAPL and Samsung (5930) products, while earlier this month ADDYY announced that it was closing its Digital Sports Division to re-shift its focus on app platforms. While those exits don’t bode well for IDC & CCS’ projections, the wearables market has one potentially game-changing card to play; if it can generate meaningful data reflecting the health benefits associated with usage, subsidized (i.e. insurance) cost programs (which would theoretically result in increased sales) could follow.

Fan MarinoAsics (ASCCF) also recently entered the fitness software space, introducing a mobile application that offers consumers on-demand workouts. Entitled Asics Studio, professional trainers guide users through workouts that are synced with pre-selected playlists to recreate the atmosphere of a boutique fitness class. Strength training, treadmill, fusion (strength and cardio package), outdoor running, elliptical and indoor cycling classes are all available for $9.99/mo. The latest company looking to cash in on the wearable data and analytics market, expected to be worth $838 million by 2022.

Wearables still slow to catch on in the U.S.

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Fitbit Outsells Wearables Competition in Q3, Apple Catching Up Fast

Fitbit (FIT) and Xiaomi (low-cost gadgets, China) sold more wearables than any other companies in Q3 (3.6 million units shipped), but both saw YOY sales declines (33% and 3%, respectively), as consumer demand gravitated from simple fitness trackers to multi-purpose smart watches. IDC Global Intelligence noted that sales of FIT’s new Ionic smartwatch ($300 retail) are off to an “encouraging” start, but that sales did not make up for the steep decline in its lower-priced wearables. Apple (AAPL), which placed 3rd in the quarter, grew sales 52% YOY; reporting 2.7 million smart watches shipped. Company sales were boosted by the September release of its Series 3 Watch, featuring LTE connectivity; enabling users to call, text and stream music without a phone.

Howie Long-Short: Samsung (OTC: SSNLF) President Young Sohn recently stated the company was looking to make a major acquisition within the digital health space, specifically within “preventive health and related technologies; leading some to believe the company could be looking to acquire Fitbit (FIT). Should SSNLF decide to acquire the wearables leader, expect FIT share prices to spike. Xiaomi Corp. remains private, but is contemplating an H2 ’18 IPO (Hong Kong the most likely destination); seeking a valuation of at least $50 billion. The company is pursuing a contrarian growth strategy; building 1,000 “Mi Home” stores (+/- 2x number of AAPL stores) by 2019, while targeting $10 billion in retail sales by 2021.

Fan Marino: Fitbit Labs, a research initiative designed to drive behavior change in FIT users, announced the upcoming launch (by end of 2017) of the Fitbit Mood Log; a clock style interface that will monitor mood, energy, physical activity, nutrition and sleep, observing patterns over time. The data collected will help users (and the company) to understand how one’s mental state effects their overall health and behavior. No athlete has done more for mental health awareness than NYG WR Brandon Marshall; you can read about his noble Project 375 organization, here.

Fitbit Is Back on Top of Wearables, But Apple Is Growing Faster

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Internet-Of-Things Baseballs Hit Market

Smart baseballs (or robo-balls), designed to help pitchers develop their curve ball and increase pitch speeds as the ball approaches the plate, are now available in Japan. Technical Pitch, created by Japanese mobile software developer Acrodea, Inc., looks and feels like any other baseball, but has sensors that capture pitch speed, the tilt of ball’s rotation and rotations per minute; with results sent to a smartphone. The company says that the data’s accuracy matches that of sophisticated MLB in-park radar systems (though TrackMan disputes that notion). Acrodea says that several MLB teams have expressed interest in the product.

Howie Long-Short: There are several ways to play smart baseballs. You can invest directly in Acrodea on the Tokyo Stock Exchange (TYO: 3823) or Alps Electric Co. (OTC: APELY), the Apple (AAPL) supplier that developed the technology Technical Pitch draws on. You can also play Mizuno Corporation (OTC: MIZUF) or Aichi Steel Corporation (a TM company), who are collaborating on a similar product (called MAQ); to be released in the spring.

Fan Marino: It seems likely that robo-balls will be used for scouting purposes. Scouts travel to far distant lands in search of the next Clayton Kershew, often lacking the resources to obtain/track reliable data related to ball movement. Now all it takes is a $180 (retail price) ball, the prospect and a catcher. Several Japanese League teams have already begun using the product. It is important to note that these baseballs are not designed to be hit!

Baseballs Are Getting Smarter

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