Should Fitbit be afraid of Apple Watch Series 4? – The fool

Actions of Fitbit (NYSE: FIT) fell 7% yesterday after Apple& # 39; s (NASDAQ: AAPL) Unveiling of the Apple Watch Series 4. The Mac's very popular smartwatch comes with a new design and the ability to take electrocardiograms (ECGs), a major health feature that sets Apple Watch apart from any other portable device focused on health. The 4 Series also includes other features that help users monitor their heart.

Here's why Fitbit should – and should not – worry about the Apple Series 4 watch.

In competition with the richest society in the world

Perhaps the best thing that Fitbit has done to compete with Apple Watch is its accessibility. The new Versa has contributed greatly to Fitbit's recovery, as the smartwatch has a much more accessible design than the Ionic, as well as an affordable $ 200. Apple Watch Series 4 starts at twice as much as GPS models, and cell versions starting at $ 500.

However, Apple has lowered its price over time, with Series 3 now starting at $ 279, a lower premium than Versa. There is a downside to Apple despite its knowledge of price umbrellas. Fitbit will always have plenty of room to undermine the Mac manufacturer.

In a research note today, DA Davidson analysts believe that the Versa will still appeal to price-conscious consumers, which could alleviate the competitive threat posed by the Apple Watch Series 4. DA Davidson reiterated a note neutral "on the Fitbit shares, along with a price target of $ 5.50.

Beyond the price, it should be noted that Fitbit smartwatches offer a much longer battery life than any other Apple watch, which means that Fitbit can offer better sleep monitoring features. Versa also has a SpO2 sensor, which allows the device to monitor blood oxygen saturation, which the company hopes to use to later detect sleep apnea. This feature is still under development, and it's not clear if Fitbit will actually release a sleep apnea follow-up.

Fitbit also plans to obtain FDA clearance for other health monitoring functions, such as the detection of atrial fibrillation, which Apple announced yesterday for Series 4.

While Wear OS continues to struggle as a platform, with many manufacturers scrapping or withdrawing product plans, Fitbit has intensified its efforts to offer the market an alternative to Apple Watch. At the last press conference, Fitbit's CEO, James Park, said, "Retailers have been looking for a counterweight to Apple, and Versa has delivered it."

It is too early to say how important the ECG function will be for Apple Watch sales. It is clear that Apple is targeting older consumers, who will fundamentally have more health problems and will gain more value from cardiac monitoring – and will also have larger budgets. If taking ECGs with a smartwatch turns out to be a case of fatal use, Fitbit may need to develop comparable features, but with a much smaller R & D budget than the most rich of the world. This further squeezes Fitbit's finances at a time when he is trying to regain profitability.

Evan Niu, CFA owns shares in Apple. The Motley Fool owns shares and recommends Apple and Fitbit. The Motley Fool offers the following options: long calls from January 2020 to $ 150 and short calls from January 2020 to $ 155 on Apple. Motley Fool has a disclosure policy.