Fitbit (FIT) Holiday Sales 'Exploding', Says Pacific Crest

Pacific Crest analyst Brad Erickson said checks showed Fitbit (NYSE: FIT) holiday sales were "exploding" with many Best Buys struggling to keep Charge HRs in stock. In his view, results are "tracking to Q4 upside," and with sentiment fairly negative he recommended buying the stock.

"While our in-store checks on Black Friday were inexplicably weak, our latest checks indicated a substantial increase in sales volumes versus a month ago, with days of inventory back down below 10 days and sell-through run rates having doubled m/m. 30% of stores we talked to have seen temporary sell-outs and we think Fitbit's share remains dominant, if not improving, thus far in Q4," said Erickson.

Erickson added, "Finally, we are also encouraged by the prevalence of discounting across the category by Garmin, Apple, etc., which has not included Fitbit. At the time of running our Black Friday store checks, we noted that, historically, Fitbit has seen 30% to 40% of its sales online on an annual basis, meaning that 50% or higher in the gift-giving holiday quarter was plausible. We are obviously encouraged by seeing in-store demand come back so strongly as a proxy for overall demand."

The analyst continued, "While bears will continue to latch on to the likely longer-term headwinds for the consumer business, we note that corporate wellness is a huge and growing opportunity for which Fitbit is in the lead, and this remains heavily discounted by most investors we talk to. We also believe new products are likely on the horizon in a few weeks at CES."

The analyst concluded, "With the stock down more than 18% since Pocketnow broke the Apple Watch refresh story in the middle of last week, we believe this has created an attractive setup with fundamentals appearing rock solid, a likely positive showing at the upcoming CES conference and ongoing potential for positive announcements regarding the burgeoning corporate wellness opportunity. We would lean in and buy FIT."

Pacific Crest has an Overweight rating on Fitbit with a price target of $47.

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

Shares of Fitbit closed at $27.73 yesterday.

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