Fitbit shares close up 10% on diabetes-monitoring partnership in new smartwatch
Fitbit Inc. shares rallied Thursday to close at levels not seen since late January after the fitness-tracker company announced a collaboration with glucose-monitoring device company DexCom Inc. to allow diabetics to monitor their blood sugar through Fitbit’s new smartwatch.
Fitbit FIT, -3.08%
shares surged to finish up 9.8% at $6.49, on more than double their 52-week average daily volume. Thursday marked the stock’s highest close since Jan. 27, after which the shares tumbled on disappointing holiday sales and a reduced outlook. Shares reached on intraday high of $6.78 in Thursday trading. Even with the jump, shares are still down 11% for the year while the S&P 500 index
has gained 10%.
DexCom DXCM, +0.04%
shares, however, closed down 5.2% at $71.23, but are still up 19% for the year.
Under the collaboration, Fitbit plans to make data from DexCom’s continuous glucose monitors available on its first smartwatch offering, the Ionic. Fitbit said they hope to have the feature available in 2018.
In a statement, Fitbit said the collaboration would allow it and Dexcom “to develop and market products to help people better manage their diabetes and get a more complete picture of their overall health with easy-to-use mobile tools.”
“While we see this as an interesting strategic relationship that could help uptake in 2018, key to the stock will be market acceptance of the Ionic amidst a crowded competitive field this holiday season,” said Stifel analyst Jim Duffy in a note Thursday. Duffy has a “hold” rating on Fitbit with a target price of $6.
The Ionic, which starts at $300, is available for preorder from Fitbit with delivery in October, and offers some functions that do not require the use of a smartphone. The Apple Watch from Apple Inc. AAPL, -1.63%
starts at $269 for older versions, but the company is expected to announce new versions next week that do not require assistance from the iPhone to perform certain tasks. Bernstein analysts said last month that they believe uncoupling smartwatches from smartphones will lead to a big uptick in sales of the devices.
According to World Health Organization figures, about 400 million people world-wide suffer from diabetes. The need for many of those who have the disease to constantly monitor glucose levels has led some of tech’s biggest companies to look for ways to address that issue.
On June 5, Apple’s Tim Cook said the new Apple Watch would be able to connect with other devices such as continuous glucose monitors, which sent shares of DexCom higher that day. In April, Apple was reported to have put together a team devoted to develop sensors that could noninvasively track a user’s blood sugar.
One of the advantages of the collaboration with Dexcom is that users will be able to see glucose reading at a glance on their Ionic watch face against their fitness-tracker data whether they are running Dexcom’s app on a phone using an Apple or Android OS, said Adam Pellegrini, general manager of Fitbit Health Solutions, in an interview. Fitbit launched its software development kit for the Ionic late last month.
Plus, he said that Fitbit’s large social-media community acts as an incentive to get other diabetics to better manage their glucose levels by sharing data and experiences.
“It’s one thing to have an app on a wearable, it’s another to have a vibrant social community and a brand of engagement,” Pellegrini said.
“Fitbit’s ability to penetrate into the health care space will allow it to better compete with Apple and should make its offering more appealing to corporate wellness programs, in our view,” CFRA analyst Angelo Zino wrote in a note Thursday morning, while maintaining a “strong buy” rating on the stock.
Dexcom’s G5 continuous glucose monitor all patients with Type 1 or Type 2 diabetes to get a blood sugar reading every five minutes without having to constantly obtain a blood sample. On its website, Dexcom said that its G5 Mobile app is available not only on a variety of phones and tablets but for the Apple Watch and Android Wear watches.
“Integration of Dexcom data is a first step but ultimately we would like to see Fitbit incorporate glucose-monitoring sensors to a device rather than partnering for data input,” Duffy said. “We view this partnership as a strategic first step as Fitbit looks to gain share in the smartwatch category after a late arrival.”
In 2014, Alphabet Inc.’s
GOOG, -1.01%GOOGL, -0.89%
Google and Novartis AGNVS, +0.39%
said they were working on a smart contact lens that would be able to monitor blood sugar levels. But that project has run into some resistance with Novartis Chairman Joerg Reinhardt reportedly calling the project “highly risky” at a recent shareholder meeting.
Smartwatches are already beginning to overtake their more traditional fitness-tracker counterparts. Recently, tech trends tracker International Data Corp. reported that quarterly sales of basic wearable devices that only ran native software declined for the first time ever while smartwatch sales saw double-digit gains.
Published at Thu, 07 Sep 2017 21:15:04 +0000 from Google News