UPDATE: Fitbit's (FIT) Valuation 'Too Compelling to Ignore', Says Barclays; Analyst Upgrades Stock to Overweight

(Updated - November 30, 2015 1:50 PM EST)

Barclays upgraded Fitbit (NYSE: FIT) from Equal Weight to Overweight and maintained a price target of $49. Analyst Matthew McClintock noted that shares are down over 25% in the past thirty days and he called valuation "too compelling to ignore." He also noted Fitbit's revenue growth rate accelerated year-over-year, despite concerns about competition.

"Considering that FIT is the fastest-growing meaningful consumer company in the world at 140%+ revenue y/y in 2015 (in a world lacking true growth stories), we believe the current valuation levels are just too compelling to ignore," said McClintock.

"Holiday 2015 got off to a muted start for the retail industry but wearables appear one of the winning product categories of the season: FIT was less discounted than peers over the weekend yet was the brand of choice according to our channel checks. FIT also dominated wearable marketing efforts for the holiday from our observations. While we expect meaningful sales upside from holiday strength, we are even more optimistic about the potential networking effect benefit that should occur in 2016 from user growth related to these sales," continued the analyst.

McClintock added, "Bears point to competition as a source of uncertainty, yet the facts would say otherwise: Despite all the fears surrounding Apple Watch, FIT's revenue growth rate actually accelerated in 2Q15 and 3Q15 relative to 2Q14 and 3Q14. Furthermore, the company's market share accelerated to 88% in 3Q15 from 68% in 2014 and 58% in 2013. Bears worry about Chinese competitor Xiaomi, yet that company isn't yet in any major U.S. retailer. Furthermore we note the advantage that FIT has from its dedicated wearable marketing budget (+$100 mm in 4Q15E alone) as well as the valuable impressions generated from corporate wellness deals that FIT competitors lack."

Barclays increased its 2015 and 2016 EPS estimates to $1.05 and $1.30 from $0.95 and $1.15, respectively.

For an analyst ratings summary and ratings history on Fitbit click here. For more ratings news on Fitbit click here.

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