SunTrust Reiterates 'Buy The Dip' In Fitbit

• Fitbit Inc (NYSE: FIT) shares have plunged 39 percent since January 4.
• SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating for the company, while reducing the price target from $48 to $30.
• While the company’s fundamentals remain sound, the price target reduction reflects the overall market multiple changes, Peck stated.

Fitbit’s shares have declined significant over the past couple of weeks. Analyst Robert Peck believes that this has created “an attractive buying opportunity for the patient investor.” He added that fundamentals continue to be robust, and the company is poised to benefit from “the urgent systemic need to reduce economic loss related to obesity.”

Related Link: Analysts At Odds With Market Over Fitbit

Peck addressed what he believed were the major investor concerns:

1. Fitbit not preannouncing its 4Q15 results at the CES – Since the CES was held less than a week after the quarter ended, it may have been difficult for the company to provide an estimate.
2. Mixed reviews for Blaze – Fitbit has a pipeline of new products planned for release in 2016, with Blaze just being the first.
3. Possible commoditization of the hardware – “[W]e believe devices are just one part of the Fitbit story – the part that is immediately visible and has been the growth driver to date…[W]e think there is a much larger addressable market for Fitbit to pursue – the broader health and fitness market – which likely is a $200+ billion opportunity,” the analyst wrote.
4. A class action lawsuit filed – While saying that it was too early to predict the outcome of the lawsuit, Peck added that even in the worst case scenario, any penalties are likely to be covered by insurance.
5. Significant share lock-up expiration - Peck believes that it is unlikely that existing investors would sell huge volumes at a time when the share price is below the IPO price.

In the report SunTrust noted, “The stock is trading at a significant discount to peers currently; when FIT provides 2016 guidance, we think the discount could look even more conservative. While we reduce PT to $30 from $48 to reflect a re-rated market, we think the risk-reward is favorable.”