Still down 25% from its mid-2015 IPO price of $20 , it's not a stretch to say Fitbit Inc (NYSE: FIT ) has been a disappointment. Indeed, for those unlucky investors who bought into Fitbit stock near its August 2015 high near $52, FIT has been downright painful to own.
Source: Via Fitbit
Of course, in light of the company's limited but mostly troubled history as a publicly traded company, the poor performance doesn't come as a complete surprise. That is, by early January a tidal wave of embarrassments - and lawsuits - stemming from the inaccuracy of its heart rate monitors was already in motion, and as early as February of this year, the company was already able to warn its first-quarter sales would fall short of estimates .
Some fans and followers have continued to cheer it on in the meantime, touting the company's two new fitness-tracking watches unveiled just a few days ago. The overall market wasn't impressed, however, judging from the continued stagnation of FIT stock.
It begs the question: What (if anything) can the company do to light a bullish fire under Fitbit stock?
Small Nuance, Big Difference for FIT
Giving credit where it's due, last quarter was a decent one for Fitbit. The company earned 12 cents per share on $586.5 million . The bottom line was down on heavy R&D spending, but sales were up 46% as the company kept its fair share of a still-fast-growing wearables market.
On the flipside, it has been an ugly fight.
As one would expect, once Fitbit validated the market for heart-rate monitoring wearables, cheaper competition materialized. At the same time, the company's so-called PurePulse technology - the part of the tracker that actually tracks the wearer's pulse - has fallen short in terms of consistent accuracy. Lawsuits have ensued .
For all of the headaches Fitbit has faced though, the idea of a wearable activity tracker isn't a bad one. Fitbit has simply chosen the most difficult path to take … appealing to consumers in a sea of competition. The wiser path may be appealing to insurers.
Mobile, medical-grade heart monitors (wrist-worn or strapped across the chest) aren't exactly new, though they're hardly mainstream yet. Part of the reason is simply that insurers don't see a compelling cost/benefit ratio yet, and as such rarely reimburse customers for the purchase of the devices.
Strangely, the ones that work with tablets and smartphones are even less likely to qualify for reimbursement .
The issue may be one of perception; the Apple Inc. (NASDAQ: AAPL ) watch and Fitbits haven't exactly cultivated an image that they're anything more than high-tech novelties. If FIT stock can work past that stigma and establish itself as a medical-grade equipment maker, it may be able to carve out a nice piece of an upper-tier medical monitoring market.
It may need to redesign the product, and then push it through the FDA's 501k regulatory pathway for medical devices. It would be worth it, however.
How worth it? The global cardio monitoring market is projected to be worth nearly $27 billion by 2020 . By 2020, the mobile health market as a whole is expected to be worth $59 billion . The overlap of those two markets alone represents a nice-sized piece of pie for current and future owners of Fitbit stock.
The nice part is the key fact that Fitbit already has one of the most recognizable names in the market.
Bottom Line for Fitbit Stock
It's admittedly an off-the-wall idea. Then again, the idea of a wrist-worn activity tracker was an off-the-wall idea a few years ago, and it's a relatively common idea now.
It should also be noted such a shift would require a logistical overhaul. There are no strict consumer standards when it comes to wearable technology, while there are mountains of red tape to cut through to satisfy the healthcare industry.
Aside from the necessary testing and R&D, Fitbit would need a small army of medical device development veterans to walk it through the process. Meanwhile, FIT stock investors would be forced to remain patient and resign themselves to some turbulence.
It may well be worth the wait, however, considering the more the consumer wearables market grows, the better Fitbit's competition gets, and the slower the upgrade cycle gets. Just ask GoPro Inc (NASDAQ: GPRO ).
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
More From InvestorPlace