Fitbit’s IPO Filing Reveals Its Successes to Date, But Has It Peaked?

fitbits-ipo-filing-reveals-its-successes-to-date-but-has-it-peaked

Fitbit, the leading fitness tracker wearables company, has filed for a $100 million initial public offering (IPO) and will become the first Silicon Valley wearables company to go public. Fitbit has been a pioneer in the fitness tracker space, launching its first device back in 2008. Fitbit now ships a range of tracker devices including clip-ons, wristbands, and even smart watch form factors. Fitbit has the leading market share in fitness trackers today, with competitors like Jawbone, Misfit, Garmin, and Polar all lagging far behind in terms of market share.

Fitbit’s IPO timing is interesting, coming right after the Apple Watch debut, with questions arising about the future of Fitbit and the tracker industry as smart watches offer fitness tracking features and much more. With the IPO, Fitbit clearly doesn’t want to delay raising money, and indeed, Tractica believes it might become more difficult for the company to do so in the future. The reasons for this are explained below. More interestingly, Fitbit also wants to show the world how successful it has been in selling trackers, and making a scalable business out of it.

The IPO filing reveals Fitbit’s revenues and income from 2011 to 2014, with revenues in 2014 at an impressive $745.4 million, which represents a 50x increase in 3 years. The company also showed a net income of $132 million in 2014. Fitbit’s unit shipments rose from 0.2 million in 2011 to 10.9 million in 2014, with active paid users for the Fitbit Premium service at 6.7 million, which is quite an accomplishment. By the end of 2015, it appears that Fitbit will most likely be a billion dollar company.

When GoPro filed for an IPO in 2014, it was a billion dollar company, as well, and it has seen its share of highs and lows. However, GoPro does not have any major competitive threats from a product standpoint, and in general GoPro is expected to do well as a unique product category. According to Tractica’s latest report on Wearable Cameras, GoPro is expected to continue to lead in market share and make a successful business out of it with 30 million wearable cameras expected to sell by 2020. GoPro also has a lot riding on its content play, with GoPro management working toward transforming the business into a media company rather than just a hardware supplier.

Fitbit, on the other hand, has a major competitive threat from the Apple Watch. Apple Watch customers are less likely to wear or purchase a Fitbit as the Apple Watch provides all of the fitness tracking features and much more. Apple also has a very compelling HealthKit health and fitness tracking platform, which is now in trials and is likely to be adopted and integrated by other healthcare organizations and hospitals across the United States. Fitbit has major headwinds coming its way, not just from Apple, but also from the other major vendors that have a stake in smart watches. This group includes Samsung, LG, Huawei, Sony, Motorola, and the Swiss watchmakers, all of which will have fitness tracking as a feature. Tractica’s report on Smart Watches forecasts that 24 million smart watches will be shipped in 2015, with the majority of sales coming from the Apple Watch. This figure will be similar to fitness tracker shipments by the end of 2015, but by 2020, we anticipate that smart watch shipments will increase to 95 million while fitness tracker shipments will be at 45 million. Overall, Tractica expects fitness trackers to remain a credible market, as there will be a user base, especially among fitness enthusiasts who will continue to use trackers, and fitness trackers will be aggressively priced to make up for declining demand.

Fitbit IPO chart

Overall, Fitbit shouldn’t find it hard convince investors. Not many IPOs have a profitable business with the strong track record of growth that Fitbit brings to the table. But the question is whether or not the company can sustain that level of growth and compete with behemoths like Apple. Or does Fitbit have a plan to expand beyond fitness trackers and go with a platform play, further monetizing and expanding its Fitbit Premium proposition? How will that compete with HealthKit? We fully expect that Wall Street analysts will closely scrutinize Fitbit on the above points as it goes public.

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