Fitbit's Moat Has Proven Defensible Through The First Mover Advantage

May 08, 2016 3:32 AM ETFitbit, Inc. (FIT)AAPL94 Comments
Seth Golden profile picture
Seth Golden


  • Fitbit may very well be the next GoPro without that next great product hit.
  • First Mover Advantage done right is critical for creating a moat around a business model.
  • Licensing is the new IP of the 21st century.

Fellow Seeking Alpha contributor Mark Hibben is right; Fitbit (NYSE:NYSE:FIT) is the next Go Pro (NASDAQ:GPRO). He outlines a strong case when he points to the lack of intellectual property that is needed to diversify Fitbit's product portfolio. But investors and readers should understand that intellectual property is not the backbone of creating a healthy and "strong like bull" economic moat around a business. However, it should be understood that Fitbit (FIT) is for all intents and purposes a one-trick-pony, hardware company that has developed a non-essential consumer good and they have marketed the heck out their products to the point of selling millions around the globe. Additionally, without a viable, defensible protective moat around the business model in the way of IP, they have become the dominant brand in the wearables category. So what is that worth? Today that is worth $13.60 a share; a far cry from the $17+ just a few days ago or the $50 price during the IPO period. But the depreciative value from then to now has very little if anything to do with having a moat around the business. Unfortunately, most investors, not some but most, simply do not think in those terms. Most investors think in terms of numbers and those numbers that Fitbit guided to for the 2nd Quarter of 2016 simply disappointed investors. But if you want to speak about intellectual property and a protective moat around the Fitbit business, let's do so.

The first mover advantage, when performed right, is the greatest protective moat around a business. Sure it leaves the door open for long-term issues if innovation doesn't find itself to support the first mover advantage, but this is usually the greatest moat around a business model. There are dozens of examples in the marketplace that demonstrate the first mover advantage

This article was written by

Seth Golden profile picture
Formerly Chief Market Strategist at Capital Ladders Advisory Group LLC. After the sale of certain of CLAG's retail and institutional assets in October 2015, I have commenced my latest venture in the CPG industry which is centered on the development and licensing of consumer and commercial technology. CooLinX Integrated Technologies develops technologies for the beverage and CPG industry. We are presently effecting licensing agreements with multi-national brands and co-developing products aimed for mass market consumption.

Disclosure: I am/we are long FIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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