Nobody ever wants to say: "look, I am stumped, I can't figure it out; call me flummoxed."
But that's how I feel about Fitbit (FIT), the company that's become the whipping boy of so many different shorts, the connected device equivalent of GoPro (GPRO).
We all make mistakes. Well, except for the people on television, I guess. Believing in the stock of Fitbit's been one of my mistakes. I could always just say, "look, I know I am early on Fitbit." And it is true that I said buy it after it came public and then said sell it when it got to $50, which was a very good call.
However, when it fell back to the $20s, I said I thought it had gotten too cheap and was deserving of another look. I said that because I thought it could earn as much as $1.20 this year and deserved to trade in the $20s given its ferociously fast 50% revenue growth and its rapid perception change from fitness tracker to health and wellness device.
I figured that given the speed with which it is being adopted by all sorts of companies and the amount of savings that are being attained by enterprises that have employees use them, it would only be a matter of time before the company would go from having a discounted multiple to a premium.
I could not have been more wrong.
The stock's been cut in half.
It's true that when it got to the-mid teens I just said I am wrong and that I have reluctantly concluded that the valuation eludes me.
The stock trades as if this will be a down year and the business has peaked.
Maybe I just refuse to believe it? I see the company's penetration worldwide to be a fraction of what it can be and the company's just scratching the surface. I see the "attach" rate, what it can grow like, to be like the smartphone, so there's a tremendous runway.
I see its different products getting better and better and the competition being eternally vanished. Remember when Jawbone was supposed to beat them? How about Nike (NKE)? Action Alerts PLUS portfolio holding Apple (AAPL) -- which isn't even competing against them? Or now about Growth Seeker portfolio stock Under Armour (UA)?
These guys have taken on all comers.
Still, though, while the health and wellness theme is clearly taking off, it represents only about 10% of the company's business. And there lies the rub. Until that percentage gets much higher, this company is going to be hostage to every holiday sales ¿ hey, how was Father's Day? -- every new iteration and every search query calculation.
In that sense, I guess what I really missed is that I felt that health and wellness would have been a bigger piece of the pie. However, the reason I missed is that the rest of the pie grew faster than I thought, not that health and wellness didn't take off.
I continue to believe that this is not a GoPro fad that peaked. I believe that 2017 will be an up year, something that clearly the stock says I am wrong about.
But I am a realist. The stock's one of the worst battlegrounds in the book, and the book says to avoid battlegrounds assiduously. Is this one that, like the Tesla (TSLA), I say, if you really like it just go buy the device, not the stock?
I know that's been the less costly narrative. But at some point, I don't know when, that will switch. I sure think we are closer to that point, even as I recognize that despite the 56% decline the company's still worth $2.7 billion and the market's just not going to let it rally from that level until all hope -- I guess mine, too -- is lost.