A Chinese investor operating under the name “ABM Capital” on Wednesday filed a disclosure with the Securities and Exchange Commission claiming to have offered $12.50 each for all the outstanding shares of Fitbit (NYSE: FIT). The bid, if true, would represent a 46% premium to Wednesday’s close.
With Fitbit stock up just over 3% as of this writing, it’s fair to investors are either skeptical or unenthusiastic about ABM’s offer. They’ve good reason to be; at $12.50, Fitbit would not only be getting taken out at a deep discount to its 52-week high of $34.68 a share, but also to its IPO price of $20 a share. Fitbit went public on June 18, 2015, and shot up to $30.40 a share within its first few minutes of trading. The stock is down over 70% year-to-date.
Speculators may be thinking the offer represents an interesting opportunity to collect a quick 40%-plus gain. Whether or not they’re right, Fitbit’s current valuation might be of interest to bargain hunters with a long-term horizon. The stock trades for just 15.5 times earnings estimates and 0.5 times revenue estimates when compared to enterprise value.
Those multiples would be fair if Fitbit were a slower-growth company, yet that’s not the case. Revenue is up 52.1% over the trailing 12 months, while analysts polled by S&P Global Market Intelligence expect earnings to grow by an average of 23% annually over the next 3-5 years. If they’re even close to right, Fitbit stock will get to $12.50 a share on its own soon enough — and could blow past that level without much trouble in the years to come.
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Tim Beyers has no position in any stocks mentioned.
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