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Fitbit Care and Humana +3

10:24 19-Sep-18


Fitbit has launched Fitbit Care, which will be preferred as a health coaching solution with long-time partner Humana for its employer group segment.  Of course, no financial terms are disclosed, but I see this as evidence of the Twine acquistion helping Fitbit, if only by allowing it to get bolder in its integration into health insurance plans.  FIT shares were initially up over 5%, but have already retreated just below the $6 level that I have cited all along. 

I do expect Fitbit will get at least minimal up-front income out of this, since it is developing Humana watch faces and the like for its products, as well a channel for dumping its old hardware.  However, the real money would be in getting a cut of health insurance savings.  Fitbit's health solutions website touts $2.3M in savings on $15.5M of health care costs for the Dayton Regional Transit Authority over two years.  That would be significant if it were extended across the industry, but I see compressing margins and declining market share as problematic.

There have already been complaints about evolving platform towards real health care, and the inevitable comparisons to the latest Apple Watches.  I still see that as less of a problem than the upcoming Android Wear models, and the ability of Alphabet to outspend and out-develop it, especially in light of my view that Fitbit's vaunted hoard of legacy data is not very insightful or even accurate.

So while this is positive for Fitbit, and worth mentioning, I think the limited stock gains are appropriate.  The main effect to should be to increase the importance of and scrutiny on non-device income over the next few quarters.  There is potential for a bounce there, but it's still not something I would bet on for the long-term.