The idea of wearable computing devices has been with us for some time, but when a company successfully comes to market in an IPO that values it at more than $4bn, it’s time to sit up and take notice.
That’s what happened to Fitbit (NYSE: FIT.US) on Thursday, when the company’s stock rose nearly 50% on its first day’s trading — the shares floated at $20 and ended the day at $29.68. Fitbit captured 34% of the market for fitness-tracking devices in the first quarter of 2015 — the market is currently worth an estimated $3bn a year, and it’s growing rapidly.
Love that gadget
Even if you’re not a fitness fanatic, a watch-sized device on your wrist that can track your heart rate, the distance you’ve walked and the height you’ve climbed, and can hook up with GPS satellites to plot your route on a map (oh, and can tell you the time as well) can still be a very attractive gadget. What I’ve just described is the Surge, the most expensive model in the Fitbit line-up and still only a modest £200 (and I love mine!)
The big question now is whether Fitbit will manage to hang on to its early advantage, with Apple (NASDAQ: AAPL.US) really only testing the market.
At the moment, the Apple Watch is relatively expensive with models starting at £299, and it doesn’t do GPS tracking — oh, and you also have to have an iPhone to make it work. But that hasn’t stopped the faithful snapping up more than 2.5 million of them already (according to the generally reliable rumour mills), and speculation over what the second generation will be like is rife.
And that really highlights the massive defensive advantage that Apple has over its rivals, even ones with such a large market share as Fitbit. It has its well-deserved reputation for making things that just work beautifully well together, and people will pay more for that consistent ease of use.
I’ve been an Apple user for a very long time — the very first Mac I ever used was the very first Mac, the famous 1984 Superbowl one, and I’ve been through a good few more since then. When I wanted a music player I got an iPod without giving it any further thought, because I knew it would just work seamlessly with my Mac (and, in fact, I got a new iPod Shuffle recently to use when I’m on my exercise machines with my Fitbit Surge on my wrist).
Admittedly when it comes to mobile phones the last one I bought was a Nokia, but that’s because I only wanted to spend £4.95. But when I wanted a tablet, I simply reached for an iPad — again because I knew it would just work without any fiddling or fettling or fannying around.
And that’s what Fitbit is up against; a multi-device platform that has a reputation for quality and seamless operation. Having said all that, I reckon Fitbit has a great future as a strong player in a rapidly-expanding market. But as for the eventual winner, the fat lady isn’t even out of bed yet.
Don’t miss our special stock presentation.
It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.
They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.
That’s why they’re referring to it as the FTSE’s ‘double agent’.
Because they believe it’s working both with the market… And against it.
To find out why we think you should add it to your portfolio today…
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.