Will FitBit flop as smartwatches take over?

Fitbit Surge
Source: Fitbit Surge

FitBit's got a lot of things going for it. But could the Apple Watch kill its momentum? Short answer: Maybe.

The company, which produces activity tracking devices, filed for a $100 million IPO on Thursday evening and revealed some pretty impressive numbers in its SEC filing. Sales for the first quarter were up 144 percent year over year, revenue is on track to top $1 billion this year and its paid active users has grown from 600,000 in 2012 to 9.5 million in the first quarter of 2015.

Read More Fitbit files for initial public offering

But keeping that kind of pace could be tricky as smart watches—which have many of the same features as fitness trackers but more functionality in general—become more mainstream.

"The future for dedicated fitness devices is uncertain. There is no doubt that hard core athletes or committed fitness types will continue to buy devices to track activities," said Julie Ask, analyst at Forrester Research. "But if this smartwatch category takes off, it could replace pedometers and devices on the low end (which is in part where FitBit competes). Fitbit also has a smartwatch, but will not be their strength."

According to Generator Research, the activity tracker and fitness market, which FitBit falls into to, will hit $2.3 billion in revenue this year, but by 2020 it will drop to $527 million in revenue because of cannibalization fueled by smart watches. The sports performance market, on the other hand, is expected to grow from $2.2 billion in revenue this year to $2.9 billion by 2020 and the smartwatch market will skyrocket from $17.2 billion to $154 billion for the same time period, according to Generator Research.

"It's very important to understand that there are three separate markets. There is the tracker market, the sports performance market and the smartwatch market. And the one smartwatches will have the biggest impact on is the tracker market," Liz Dickenson, founder and CEO of Mio, the sport performance wearable company.

Mio, which is a heart rate monitor and activity tracker, falls into the sports performance market along with other companies like Garmin, TomTom and Under Armor. Because this market is more mature than the tracker market it will be less affected by smartwatches like the Apple Watch, Dickenson said.

The real winners will be the apps that drive ongoing engagement with consumers, Ask said. While pedometers give users feedback on the number of steps, heart rate, or steps, it is the apps that drive engagement and behavioral change over the long term through competition, community, gamification and support, she said. FitBit competes here and it will be key to their success, she added.

FitBit declined to comment, citing the quiet period after their IPO announcement, but co-founder and CEO James Park previously said he's not worried about the Apple Watch, or any other wearable device.

"I think [the competition] great thing because wearables—health and tracking fitness in particular—are one of the fastest-growing categories in technology, but it's still a pretty new concept for people," Park told CNBC in March.

"So anything that helps people learn more about health and fitness tracking, I think that is great for the industry."

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