Fitbit Shares Underperform As Deutsche Bank Downgrades To Hold

Fresh off an acquisition of certain assets of Pebble, analysts at Deutsche Bank downgraded shares of Fitbit Inc (NYSE: FIT) to Hold from Buy with a price target slashed to $9 from a previous $18.

Deutsche Bank Commentary

In a research report, Sherri Scribner highlighted data from IDC, which suggest the wearable market grew just 3 percent in the third quarter, marking a notable deceleration from 67 percent in the first quarter and 26 percent in the second quarter.

Although Fitbit's growth outpaced the overall market, the analyst suggested that Fitbit's comments during its third-quarter conference call suggest the outperformance was due to demand pull forward.

Scribner added that IDC's data could indicate a "pause" in demand, as consumers who were interested in buying a device have already done so, while consumers sitting on the sidelines haven't found a compelling enough device to buy. This trend could improve, and Fitbit's focus on the health segment could increase adoption, but it will do so at a slower pace.

Pebble Acquisition Not Material

Commenting on Fitbit's acquisition of some of Pebble's assets, including personnel and IP-related to software and firmware development, the analyst noted it is a "positive" for the Fitbit experience, but the small size of Pebble's market and limited momentum won't yield any material results for Fitbit.

Shares of Fitbit failed to participate in Thursday's rally, as the stock was trading lower by 0.19 percent, lagging major technology stocks and all the three major stock indices.

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