Fitbit shares picked up the pace Wednesday, rallying 14 percent after big box retailer Target said it would offer the company's wearable activity tracker to 335,000 U.S. employees. The announcement marked one of Fitbit's largest corporate deals in its history.
Fitbit is now up more than 80 percent from its June 2015 IPO price of $20, but according to one trader the stock is about to stop dead in its tracks.
"This is a stock that, trading at a multiple of 36.5, is overvalued. Even after the pullback in the last month," David Seaburg said Wednesday on CNBC's "Trading Nation." The stock rallied more than 180 percent from its June IPO to early August high, and has since fallen more than 35 percent. "There's no way over the long run that this company is going to survive or trade at the premium multiple that it's trading at currently," he added.
For Seaburg, the recent move in Fitbit is comparable to what we saw in GoPro after its June 2014 IPO. "GoPro went public and the stock went straight up in the air. There was a ton of euphoria in this product and then it backed off," said the head of sales trading at Cowen and Co. Shares of GoPro surged more than 200 percent to just under $100 after its IPO, eventually falling to its current price of $35. "It's now trading at a multiple of below 20," he added. "Fitbit needs to start trading more like [that]. Like a hardware company."
Seaburg believes that Fitbit shares could stay afloat for the next two quarters, as the company has been conservative on guidance. "I see the third and fourth quarter being OK for this company, but then it's lights out," said Seaburg. "I think growth for this company is going to stall big time."
Contrary to Seaburg's call, Wall Street analysts tend to think positive of the stock. Of the 13 polled by FactSet, the average price target is $51.71 with an overweight rating.
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