Fitbit sell-off 'overdone': Analyst

Fitbit Blaze watches are displayed during the 2016 CES trade show in Las Vegas, Nevada January 6, 2016.
Steve Marcus | Reuters
Fitbit Blaze watches are displayed during the 2016 CES trade show in Las Vegas, Nevada January 6, 2016.

With fresh rivals and a data breach, Fitbit seems to have fallen out of favor in the fickle fit-tech world, losing more than a billion dollars of market capitalization in a steep sell-off, by one estimate. But some analysts think there's hope for the breakout company to turn over a new leaf in the rest of the year.

It's been a doozy of a 2016 for shares of Fitbit, which have dropped about 36.5 percent so far year to date, in a somewhat unexpected turn of events for the company that less than a month ago had the most-downloaded app of the holiday shopping season. (The shares dropped briefly below the IPO price for the first time Monday.)

It all started last Tuesday, when the stock slipped around 12 percent to touch a record low after the debut of its new $200 model Blaze. The smart watch touted expanded features such as call, text and calendar alerts, on-screen workouts with personal trainers, a connection to a smartphone GPS and heart rate tracking, according to a company release.

A Fitbit spokeswoman that day downplayed the tumble: "We cannot control how the public markets respond. We are focused on delivering strong results and are excited for what 2016 and beyond has in store."

The same week it was revealed FitBit users' data were the target of a hack attack.

"Our investigation found that the accounts that were accessed by an unauthorized party had 'leaked' credentials [email addresses and passwords], compromised previously from other third-party sites, unrelated to Fitbit," a company spokeswoman said.

It all hit Fitbit at a time when fitness-based New Year's resolutions abound — and competitors from Under Armour to Fossil to Apple are hoping to capitalize with rival products to Fitbit's flagship wristbands. But there may be a light at the end of the tunnel for the company, analysts said.

Baird Equity Research analyst William Power lowered his price target for the stock from $54 to $30 Monday, citing tougher comps. But he said he's still expecting strong fourth-quarter results from the company, despite the sour reception of the bare-bones smartwatch.

"The Fitbit Blaze, which, while sporting solid functionality, was panned by many for its design and potentially greater competition with Apple Watch," Power wrote in a research note. "Importantly, whether the Blaze succeeds or not ... the market is already expecting the worst."

With the drop eviscerating $1.4 billion of market cap value by Wednesday, SunTrust Robinson Humphrey's Robert Peck kept his price target for the stock at $48, calling it a "buying opportunity."

"We think that even if the market were disappointed with the ultimate demand potential of the new product, that the sell-off was overdone," Peck wrote.

Despite the stock market volatility, the company has received "great feedback" from major retail partners, as it positions the new watch as a dedicated fitness tool, a spokeswoman told CNBC.

"Last week was one of the worst opening weeks to the stock market in years, making it a tough week for just about everyone," the Fibit spokeswoman said. "Despite the sensationalized headlines, we have seen tremendous excitement from retailers, consumers and media around Fitbit Blaze."

She pointed out that Fitbit Blaze won more than 16 awards at CES.

Disclosure: Robert W. Baird & Co. makes a market in the securities of FIT. SunTrust Robinson Humphrey Inc. managed or co-managed a securities offering for Fitbit in the last year. Fitbit is a client of SunTrust Robinson Humphrey Inc. and the firm has received or is entitled to receive compensation for investment banking services involving their securities within the last year. An affiliate of SunTrust Robinson Humphrey Inc. has received compensation for products or services other than investment banking services from Fitbit within the last year.