Deutsche Bank slashes Fitbit's price target by 50% to $9, says wearables demand is 'waning'

Published Thu, Dec 8 201611:01 AM EST

Deutsche Bank on Thursday downgraded Fitbit to hold from buy, slashing its 12-month price target by 50 percent to $9 from $18, on concerns of waning demand for wearable devices that has caused the stock to plunge more than 70 percent this year. "We continue to view FIT as a leader in the wearable fitness category, but given consumer demand appears to be waning for wearable devices, we are taking a wait-and-see approach to the name," equity analyst Sherri Scribner wrote in a note to clients. As evidence of this trend, the analyst points to metrics from International Data Corporation that show the wearables market grew only 3 percent in the third quarter, a significant deceleration from the 67 percent and 26 percent growth recorded in the first and second quarter, respectively. Fitbit, 1 year Source: FactSet "We view this data as a potential indication that demand for wearable devices may be experiencing a pause, as consumers with interest in wearables have likely already purchased a device, and new consumers are not yet compelled to buy yet another device," Scribner wrote. The analyst thinks sales of wearable devices could remain subdued in the years ahead, as manufacturers such as Fitbit try to develop new ways to attract customers with expanded features and product offerings. Those initiatives will likely take time. "While we view FIT's focus on expanding into the health segment as interesting, we expect adoption in this area to be slower, and we expect sales to remain small in the next few years," she said. In the next 12 months, Deutsche Bank believes shares of Fitbit could still rise by as much as 13 percent to $9, as bottom-fishing investors pick up the stock on hopes of a potential rebound. "Given the positives of Fitbit's strong position and new product introductions are largely balanced by risks related to slower growth of the category, we view current puts and takes as balanced and rate FIT a Hold," the analyst said. — CNBC's Michael Bloom contributed to this story.

Fitbit smartwatches

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"We continue to view FIT as a leader in the wearable fitness category, but given consumer demand appears to be waning for wearable devices, we are taking a wait-and-see approach to the name," equity analyst Sherri Scribner wrote in a note to clients.

As evidence of this trend, the analyst points to metrics from International Data Corporation that show the wearables market grew only 3 percent in the third quarter, a significant deceleration from the 67 percent and 26 percent growth recorded in the first and second quarter, respectively.