Fitbit's (FIT) New Alta Wearable Could Drive New Sales, Improve Margin Mix - Dougherty

Dougherty & Company reaffirmed Fitbit, Inc. (NYSE: FIT) with Neutral rating on Wednesday after the company unveiled its new Fitbit Alta wearable.

Analyst Charles Anderson summarized, ... the Alta is as thin and sleek as the $100 Fitbit Flex, but with a larger screen for notifications (caller ID, text) and more elegant band options. The device will launch in North America in March and globally in April, similar to the launch schedule of the $200 Blaze smartwatch.

Anderson also noted: The Alta will come in three wrist sizes, so appealing to both men and women. The device can also be swapped out with multiple fashion bands, including a $60 leather band and $100 metal band. Our gut reaction is that the Alta will appeal to women much more than the $100 Fitbit Flex did. This device will offer them the ability to get Charge's features, plus text notifications and auto exercise recognition, in a sleeker form factor that incorporates a screen (missing from the Flex). And the Alta form factor is not as large as the $200 Fitbit Blaze that was introduced at CES in early January, but it is missing music control, heart rate monitoring and multi-sport mode.

We estimate that the Flex represents roughly 10% of Fitbit's sales. If we assume half of the Flex buyers migrate to the Alta (representing new sales), we estimate that would add an incremental $34MM to annual revenue ($22.50 wholesale ASP difference x 1.5MM units) and $0.05 to annual EPS. Of course, the goal here would also be to have the Alta grow the addressable market beyond Flex and Charge users. Our sense is that the Alta will carry higher gross margins than prior products, the analyst concluded.

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

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