Fitbit Inc (NYSE:FIT) has been facing a hard time due to poor sales but Morgan Stanley (NYSE:MS) believes that the company could turn its fortunes around by changing to better software.
Morgan Stanley analysts Katy Huberty and Yuuji Anderson expressed their opinion on what they think would be the saving grace for Fitbit during a recent keynote. They stated that the company would have to switch from single purpose fitness trackers to multipurpose smartwatches if they want to maintain their relevance in the wearables market. The analysts also pointed out that adopting better software would be a great start towards achieving the objective.
“Our analysis finds that persistent improvements in software features drive consistency across product cycles. New functionalities in fitness often migrate to other models targeting different audiences (marathon runners, triathletes, outdoors, etc.) and price points,” Morgan Stanley noted in a statement.
The statement also pointed out that refreshed products usually have a hard time securing sales in the market if they are not characterized by regular software improvements. The Morgan Stanley analysts believe that the fitness wearables manufacturer has the capacity to boost hardware functionality through software upgrades. The company’s annual revenue grew by more than $1.7 billion from 2012 to 2015 but it has been experiencing declines since 2016.
The slowing growth could be attributed to a number of factors and the main one being stiff competition from rivals. Apple Inc. (NASDAQ:AAPL) has been one of the major rivals with the Apple Watch which has been performing quite well. Additionally, the company has been employing fitness capabilities in the Apple Watch thus giving Fitbit a run for its money.
If Fitbit were to employ some enhancements especially to fitness functionality, then this might allow it to compete more effectively with its rivals. Recent rumors about the company suggest that it might soon feature a new app ecosystem, a biometric sensor and features for mobile payments. These improvements might place the company back on its growth track and help improve revenue.
Fitbit stock closed the latest trading session on Monday at $5.16 after a 1.15 percent decline compared to the value of the stock during the previous close.
