'Hard to See a Floor' on Fitbit: Morgan Stanley

Shares of wearable technology company Fitbit Inc. (FIT) have crashed nearly 10% as of Monday morning on a bearish note from a team of analysts on the Street who downgraded the stock to sell. Trading at $4.61, FIT reflects a 19.2% loss year-to-date (YTD) and a 22.1% decline over the most recent 12 months, compared to the S&P 500's 2.9% slide and 9.9% gain over the same respective periods. 

As the fitness tracker maker struggles to ward off new competition from rivals including Cupertino, California-based tech giant Apple Inc. (AAPL), analysts at Morgan Stanley warn on further downside and suggest that it's "hard to see a floor" for the stock price. 

FIT Price as Competition Ramps

San Francisco-based Fitbit has attempted to revive sales with new products such as its Ionic watch, with a screen for workout videos and other health monitoring features, as well as Bluetooth earphones, a new Aria fitness tracker and an upgrade to its subscription-based fitness-coaching product. (See also: New Fitbit Watch Can Reverse Bad Fortune: Analysts.)

“We see more downside to the stock as revenues struggle to stabilize and cash burn resumes," wrote Morgan Stanley's Yuuji Anderson in a note to clients Monday. "New smartwatches will be outweighed by declines in legacy products, while software opportunities in health coaching will take time to ramp."

Anderson downgraded the stock from equal weight to underweight. His new $4 12-month price target, down 20% from his previous forecast, implies a 13.2% downside from Monday morning. 

Stock Price Could Halve in Worst-Case Scenario

"If demand for new products does not rebound meaningfully, we would expect further downside to our estimates," stated Anderson. "Should demand decline faster, we see the stock leaning towards our bear case ($2)."

While Fitbit touts the value of its wearable data set, analysts see limits to this value, adding that "wearables data is only a part of a broader focus by the health care industry of electronic medical records and payer data." Anderson highlighted competition from rivals such as Apple, who are inking their own partnership agreements and quickly stealing share from Fitbit with new products such as a cellular smartwatch with an emphasis on health. In 2016, Apple Watch sold 16 million units, up 60% over the year, according to CCS Insights. Fitbit sold 15.3 million devices last year, down from the 22.3 million sold in 2016. (See also: Smartwatch Sales to Hit $29B by 2022—Thank Apple.)

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