Fitbit goes IPO

Juniper Research analysts estimate that global retail revenue from smart wearable devices will triple by 2016 and reach $ 53.2 billion by 2019, compared with $ 4.5 billion in 2014. Over the next five years, market growth will be driven by increased sales of premium smart watches and smart glasses.

Tomorrow, June 18 will be the initial placement of FitBit, one of the leaders in the market of fitness devices for an active lifestyle and other wearable electronics.

According to the latest information, Fitbit has increased the volume and price of the sale of shares in an initial public offering (IPO).

The company plans to place 34.5 million Class A securities valued at between $ 17 and $ 19 each (the company had previously planned to place in the range of $ 14–16). If the IPO goes along the upper price limit, Fitbit will attract more than $ 750 million and will be valued at $ 3.7 billion. Given some market hype, it will not be a surprise if the price range is removed before Thursday begins. The company's shares will be traded on the New York Stock Exchange under the ticker “FIT”. Underwriters for the planned public offering are Morgan Stanley, Deutsche Bank, Bank of Amercia / Merrill Lynch, Barclays, Piper Jaffray, SunTrust Robinson Humphrey, Raymond James, Stifel and William Blair.

Fitbit was founded by Harvard and Yale alumni James Park and Eric Friedman in 2007.

After the initial offering, the company plans to continue to invest heavily in further research and development to strengthen its product line. In addition, it is planned to expand the company’s activities through the corporate segment, by interacting with employers and fitness centers.

The successful development of the company and the wearable device market in general allows us to have no doubt about the prospects, but the downside is that this success attracts a lot of attention from competitors. For example, Apple introduced some of the capabilities of Fitbit devices into its smartwatch, given the power of Apple, the young company should exercise some caution. In addition, you can not discount Jawbone, which recently filed two lawsuits against Fitbit.

Financial performance

A look at the results of the first quarter shows the company's revenue growth of 210% to $ 336.8 million with a significant increase in sales by 3.9 million from 1.6 million for the same period last year. Moreover, in the United States income increased to $ 175.5 million, and in the international market to $ 52.4 million.

Fitbit expenses also increased sharply. In particular, marketing expenses increased by 289% to $ 43.9 million, and research expenses by 147% to $ 22.4 million. However, revenue growth compensates for high expenses, resulting in $ 89.9 million in operating profit, which amounts to 469 % growth for the year.

Conclusion

In general, we can draw conclusions about the likely successful placement. Significant revenue growth seems to be the most obvious positive factor in favor of the company. Plus, I’ll add a reasonable planned share price and the overall growth of the wearable device market. Significant price spikes are likely in the IPO process. The predicted price by the end of the first day of trading is $ 35- $ 38, although it goes without saying that I could be wrong.