- Fitbit is soaring after short seller Andrew Left suggested there are big gains ahead.
- Left believes Fitbit's revenue growth potential is underappreciated by Wall Street, and that its shift to services and software will enable it to have a more constant revenue stream.
- Somewhat uncharacteristically, Left's Fitbit note is his second in two weeks that moved a stock dramatically higher because his position was bullish.
- Watch Fitbit trade in real time here.
Andrew Left is known for writing bearish reports that erase billions of dollars of market value in mere minutes. But if you only looked his firm's activity over the past couple of weeks, you'd think he's known for being bullish.
In a note sent out to clients on Monday, Left announced a $15 price target for Fitbit - more than double where it's currently trading - calling it a legitimate medical-technology company.
"What was once a piñata for short-sellers (since IPO) has transformed itself to one of the most underappreciated med-tech stories in the market," Left wrote in a note out Monday.
And top players in medicine and healthcare are recognizing Fitbit as an important company in the field.
The Journal of the American Medical Informatics Association highlighted the role Fitbit plays for patients who need to monitor their heart health, Left noted. It has also been classified by the FDA as a company that will revolutionize digital health in the US.
Fitbit announced a partnership with Dexcom, a manufacturer of glucose monitoring devices, and linked up with Google to use its artificial intelligence and cloud healthcare API in order to connect user data with electronic medical records.
And that's exactly the shift Left hangs much of his call on. He mentioned Fitbit's potential for "recurring revenue" streams as one of his keys to his bull case four times in his note. That's a big change from its previous model, which relied on one-time device sales to customers, garnering the ire of Wall Street.
"Fitbit has improved its core business offering with a slow, methodical and well telegraphed but unnoticed shift to Wall Street," he said. "The overhang of a poor legacy business with declining revenue, and a large R&D spend (that although quite positive) has weighed on short-term profits and effectively the short-term outlook of the investor on Wall Street. "
Fitbit isn't the only stock the notoriously bearish Left has given his stamp of approval to lately. He published a note on May 31 saying Snap is "one stabilizing quarter from giving investors a 30% or more return -- more than you can see in any FANG stock in our opinion."
Markets Insider