Fitbit Targeting Women, Children and the Price Conscious Amidst Stiff Competition

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Fitbit (FIT) believes there is an opportunity to “bring more women into the smartwatch category”, one that is currently 60% male, and is developing a series of newly designed apps for the female user. The company plans on building the largest database of women’s health metrics (from healthy women), tracking menstrual cycles, fitness activity and sleep patterns; while offering users health tips and insight into their fertility window. The apps will be available on the Ionic and newly introduced Versa model; announced as a “mass appeal” (see: affordable) watch, with versions starting at just $199. It should be noted that FIT also sees an opportunity to capitalize with children (8+), announcing the pending release of the company’s first kid-focused tracker.

Howie Long-Short: Fitbit (FIT) shares took a dive (-11% from $5.11 to $4.55) earlier this week (they have rebounded slightly since to $4.91) following a note from Morgan Stanley analyst, Yuuji Anderson, stating, it’s “hard to see a floor” on the company’s share price; while projecting the company’s sale of “new smartwatches will be outweighed by declines in legacy products.” If true, that would explain why the FIT is placing an emphasis on data collection; it’s hoping to resell the information to insurance and healthcare companies and generate some recurring revenue. Shares are down 31% since December 11th as questions remain about the company’s ability compete in a crowded smartwatch market (think: Apple, Xiaomi, Garmin, Huawei).

Fan Marino: A man was sentences to 2 years in jail for creating a phony buyer, with the intention on manipulating FIT’s share price in Nov. ’16. The con filed a document stating FIT had an offer from a buyer prepared to pay far above the share price. As news broke, shares increased 10% and the man dumped his options for a $3,000 profit. Clearly, not a man familiar with the concept of risk/reward.

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WSJ: Just 7 Ways to Publicly Invest in Sports, JWS: Not the Case

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The WSJ published a recent story asserting there are few ways to directly invest in sports, a notion we dispute. The article deemed just 7 publicly traded equities to be sports-related and based their conclusion, that fans are better off watching and playing sports than investing in them, on the performance of 2 exchange traded funds; one of which (FANZ) has beat the S&P since its July ’17 inception, which would seem to counter to their argument. The article cites Matt Hougan, the CEO of Inside ETFs, and his belief that most of the economic value within sports (ownership and player contracts) “comes in private transactions”, to support the author’s thesis; but fails to pay consideration to the revenue streams that support those contracts (and generate ownership profits). It’s worth noting that JohnWallStreet follows over 100 sports-related equities.

Howie Long-Short: Sports teams generate revenue from 4 sources; broadcast rights, ticket sales, sponsorships and merchandising. Several publicly traded equities use a similar business model; Churchill Downs (CHDN), International Speedway (ISCA), Dover Motorsports (DVD) and Speedway Motorsports (TRK), and thus should also be included on the list. Others, like Acushnet Holdings Corp. (GOLF) and Callaway Golf Company (ELY), are undeniably directly tied to sports; and no one would claim your basket was unfocused if companies like Nike (NKE), Lululemon (LULU) and Fitbit (FIT) were to be included. Oh, and don’t forget Activision Blizzard’s (ATVI) new esports league (Overwatch); their inaugural season starts today.

Fan Marino: The story names the New York Knicks, New York Rangers (MSG), Atlanta Braves (BATRK), Manchester United (MANU) and Borussia Dortmund (BORUF) as the teams you can purchase equity in. The Toronto Blue Jays, Toronto Maple Leafs (RCI), Juventus F.C. (JVTSF), A.S. Roma (ASRAF) and SS Lazio (BIT: SSL) are also all publicly traded.

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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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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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Fitbit’s Partnership with Adidas is About Gaining a Foothold in China

Fitbit (FIT) announced a partnership with Adidas (ADDYY) in September, promising consumers a new device loaded with programs to complement the company’s personalized training software. While the new special edition Ionic watch (to be released in ’18) will offer coaching and guidance, that distinguishes it from low-end fitness trackers, the decision to partner with Adidas centered on ADDYY’s popularity within China (‘16 revenue +28% YOY to $3.5 billion) and FIT’s inability to crack a market dominated by Xiaomi and Apple (AAPL). In Q4 ’16, FIT CEO James Park acknowledged the company had “yet to gain much traction in large markets like China” before expounding on the company’s plan in Q1 ’17 saying, the company would “look at a partnership model versus trying to develop the market all on our own.” Adidas has a large retail presence in the country, with more 10,000 brick and mortar locations.

Howie Long-Short: FIT saw Q3 growth over Q2 figures, but both revenue and units sold remain depressed from 2016 totals. Q3 ’17 revenue was down 22% YOY (to $392.5 million) and the total number of units sold dropped 32% YOY (to 3.6 million). Q4 will be the first full quarter of sales for the Ionic smartwatch and the company expects that product to drive quarterly revenue to between $570-$600 million; a figure that would be in line with their Q4 ’16 total, signaling that the company is on the “path back to growth and profitability.”

Fan Marino: Speaking of Adidas, the company introduced a new smart soccer ball to be used in the 2018 World Cup. The Telstar ’18, modeled after the original Telstar ball used in the 1970 World Cup, is being marketed as the most “tech savvy” ball history. Fans will be able to tap their phone on the NFC microchipped ball to unlock a unique consumer experience.

Fitbit’s Real Reason to Partner With Adidas

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VIRGIN SPORT SAN FRANCISCO CEO MARY WITTENBERG DISCUSS THE FESTIVAL OF FITNESS, HER FAVORITE FITNESS WEARABLE AND MUST TRY WORK-OUTS

The Virgin brand is synonymous with access and opportunity (see Virgin Galactic). Virgin Sport San Francisco, Richard Branson’s movement to connect people through sport and culture; has created a weekend long event, a Festival of Fitness. Scheduled to take place in San Francisco on October 14th and 15th, the event will have something for everyone; from running and fitness activities to music, art and local fare. JWS had the opportunity to speak with CEO/Chief Exercise Officer Mary Wittenberg about the event, its sponsors, wearables and workouts.

JWS: The company’s stated mission is to “move the world through sport”. How does Virgin Sport define success?

Mary: In the short term, we’ll be looking at the net promoter score; do the participants want to come back. We’ll be looking at sponsorship growth from the first year to the second, participation growth and the strength of the relationships we are able to develop with local, grass roots fitness groups, within the communities. Longer term we’ll be focused on traction gained in adding cities (currently focused on SF & London). 1 million participants in 10 years would certainly be considered a success.

JWS: When selecting sponsors for the event, were you looking for companies aligned with the mission or the most lucrative financial agreements?

Mary: Virgin Group incubates companies and then brings strategic partners in along the way. Who you partner with early on says a lot about your brand. Richard fully funded the company, so we can partner with companies that share our vision (Motiv, Clif, Nuun, Headspace, Flywheel Sports, Classpass). Richard has also always been very supportive of entrepreneurs.    

JWS: ASICS (TYO: 7936) is the founding partner sponsor of the event. Besides the fact that they manufacture shoes and apparel needed for a weekend of sports activities, what makes them a strong partner? 

Mary: ASICS is interested in culture. They wanted to be a co-creator. They are at our side and have a real voice. When you can create with a partner, they are going to be that much more engaged.

JWS: Do you have a favorite in the fitness wearables market?

Mary: I’ve tried a bunch, Apple (AAPL), Fitbit (FIT); I like the watch. I’m excited about the ring that Motiv is working on. I like functional accessories.

Howie Long-Short: For those wondering, a net promoter score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. The customer is asked just one simple question, “How likely are you to recommend the company/product/brand to a friend or colleague?” They are asked to rate on an 11-point scale (0-10).

Fan Marino: Mary qualified for the 1988 Olympic marathon trials, so she knows a bit about training. I asked for some ways to keep exercising from getting stale. Mary suggested joining November Projects (now in 41 cities) and trying FlyBarre (particularly guys who think ballet when they hear barre).

GARMIN INTRODUCES 3 NEW FITNESS FOCUSED SMARTWATCHES; FITPAY TO SUPPORT CONTACTLESS PAYMENT

Garmin has introduced a new line of GPS enabled smartwatches designed to compete with Apple (AAPL), Samsung (KRX: 005930) and Fitbit (FIT). The line contains 3 watches; the Vivomove HR (fashion focused hybrid), Vivosport (fitness focused) and Vivoactive 3 (feature packed flagship). The Vivoactive 3 will include Garmin Pay; a contact-less payment system, powered by Fitpay, Inc. The watches, which are now available, range in price from $199-$329.99; significantly less expensive than their high-end Fenix-5 series ($600).

Howie Long-Short: Fitpay provides a technology platform that adds contactless payment capabilities to wearable and loT devices. The company is a subsidiary of NXT-ID Inc. (NXTD) which generated $14.3 million in revenue over the first 6 months of 2017, up from $81K over the same period the year prior. Most the revenue increase comes from another subsidiary, LogicMark, the biggest manufacturer of personal emergency response devices in the United States. NXTD acquired the company in 2016 for $20.9 million in cash and stocks with another $6.5 due should the company meet certain milestones over the next 18 months.

Fan Marino: Garmin is competing with Apple, Samsung and Fitbit in the smartwatch space, but has 2 distinct advantages. Their watches sync with iOS, Android and desktop software and they have batteries that can last for a week without recharging. Those aren’t features that I’m looking for, but it’s something to hang their hat on.

Garmin goes after Apple, Fitbit with new line of smartwatches

FITBIT PARTNERS WITH DEXCOM TO BRING GLUCOSE LEVEL DATA TO IONIC SMARTWATCH

Fitbit (FIT) has announced a partnership with Dexcom (DXCM) that will enable the brand’s new Ionic smartwatch to continuously monitor user glucose levels through a G5 mobile sensor, beginning in early 2018. The deal means that diabetes patients will be able to seamlessly transfer up to the minute glucose level data to their wrist for easy access. Dexcom’s G5 system for blood sugar monitoring requires users to embed a sensor just below the skin, with a compatible app providing levels updates every 5 minutes.

Howie Long-Short: Fitbit making the move from fitness tracking to health tracking is wise. The stock is at its highest price since January, when the company laid off 6% of its staff and first announced its intentions to introduce a smartwatch.

Fan Marino: Dexcom already has a partnership in place with Apple (AAPL), so this deal isn’t giving Fitbit a leg up in the smartwatch race. In fact, Apple is reportedly working on a non-invasive real-time glucose monitor for future versions of their Watch and is apparently far enough along in development that the company has begun feasibility testing.

https://techcrunch.com/2017/09/07/fitbit-is-surging-after-it-announced-a-big-health-partnership/

NEW APPLE WATCH TO WORK WITHOUT PHONE, SUPPORT WIDE RANGE OF WORKOUTS; FITBIT ROLLS OUT SMARTWATCH

Rumors indicate that Apple Inc.’s (AAPL) next Apple Watch will include its own cellular modem chip. Benchmark analysts believe that providing the smartwatch with the ability to connect directly to cellular networks, without the use of a smartphone, is the key to consumer adoption and that the change could push the smartwatch market to reach 100 million units sold by 2021 (up from 30 million this year). The new Apple Watch will run on watchOS 4 (scheduled to be released in September), and support workouts ranging from common fitness activities to sailing and fishing. While AAPL is the current smartwatch leader with an estimated 50% market share, FitBit (FIT), the leader in the less capable fitness tracker space, has just introduced its newest fitness watch, the Ionic.

How Apple could make smartwatches more popular, and potentially help Fitbit

Howie Long-Short: So FIT launched their first smartwatch using hardware and software built in-house, right after APPL announced it is introducing a cellular version of its Apple Watch. FIT execs must feel like they are walking in quicksand…which would seem like a good workout.

Fan Marino: While the Ionic can’t beat the new Apple Watch from a technology standpoint, FIT is doing what it can to ensure the watch competes from a marketing one. The company has announced it is teaming with Adidas (ADDYY) to provide a branded version of the Ionic in 2018.

DESPITE 40% YOY DROP IN DEVICES SOLD, FITBIT BEATS ANALYSTS Q2 EXPECTATIONS

Despite a 40% YOY decline in devices sold, Fitbit (FIT) managed to exceeded analyst expectations during the 2nd Quarter. FIT reported sales of $353 million (compared to estimates of $341 million) and losses of $.08/share (compared to estimates of $.15). The once high-flying fitness band company is hoping a pivot to becoming a digital health company, focused on corporate wellness, will change its fortunes. CEO James Park announced the company’s new smartwatch will be released in time for holiday shopping, and is expected to drive second half sales.

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Fitbit Tops Sales Estimates on Renewed Demand for Fitness Bands

Long-Short: The beauty of low expectations. There’s not much room downward left for this stock.

Fan Marino: The FIT stock has dropped 90% in 2 years. A pivot is in order, but I don’t see a need/market for the smart watch.