Fitbit steps out on Wall Street with first stock sale

Fitbit strode across the finish line in style on its first day of public trading on the New York Stock Exchange Thursday.

In one of the more anticipated initial stock offerings of the year, the maker of the now-ubiquitous step-counting wristband saw its market value rise to $6.1 billion, with the stock rising nearly 49 percent above its offer price of $20 to close at $29.75 a share. Fitbit shares briefly traded just below $32 before falling back at the close.

The price demonstrated rising investor enthusiasm as the IPO date approached — the fitness tracker company’s stock had first projected to sell at around $14 to 16 per share. Because of huge demand shown by investors, the offer price was raised to $20 and the company increased the number of shares for sale from 29.9 million to 34.5 million.

The 8-year-old San Francisco-based company makes wearable devices that track health data such as distance walked, calories burned and stairs climbed. The devices, which range from watches and wristbands to pocket clips, have caught on and Fitbit sold 10.9 million devices and earned over $700 million in revenue last year.

CLSA analyst Ed Maguire thinks Fitbit will benefit significantly from being the first company to go public in what may soon be a crowded market. “Fitbit has taken brand awareness to a far greater level than competitors,” he said.

Some believe Fitbit’s success might be more of a reflection of the profitability of the emerging market than the product itself.

Angelo Zino, an equity analyst at S&P Capital IQ, compared Fitbit’s initial success to that of the Blackberry, a once-dominant smartphone that eventually lost out to Apple’s iPhone. “Fitbit has to find a way to defend the position they’ve built here,” he said.

Alex Gauna, a technology analyst for JMP Securities, said he was optimistic that Fitbit can continue navigating the market, saying, “I don’t think there’s a lot to fear for Fitbit. It’s a clear leader in the market obviously, with more than 11 million units sold last year.”

Another threat to Fitbit’s financial success comes from below. Alternative, cheaper rivals such as the Mi Band made by Chinese company Xiaomi could challenge Fitbit’s current lead. The company could find itself caught in a no-man’s land between the expensive, multitask smartwatches and cheaper, simpler fitness bands.

Added to these concerns are recent legal troubles.

A competitor, Jawbone, recently filed a lawsuit against Fitbit, accusing them of hiring former employees who stole intellectual property. The lawsuit essentially claims that every Fitbit product infringes on Jawbone patents.

But the successful IPO was testament to investors’ faith that Fitbit’s market lead and its current price advantage over rivals such as Apple will make it a formidable force in a growing market segment.

The potential is huge. About 126 million wearable devices are expected to be shipped in 2019, representing nearly $28 billion in revenue, according to the industry monitoring firm IDC. In 2014, about 20 million units were shipped.

And analysts noted that Fitbit currently gets only about 20 percent of its revenue from the international market, giving it plenty of room to grow.