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Fitbit (FIT) Stock Gains on Settlement of Jawbone Lawsuit

Zacks Equity Research

Shares of Fitbit, Inc. FIT gained approximately 2.4% on Monday after the company announced a lawsuit settlement with AliphCom LLC (assignment for the benefit of creditors), the assignee for the former Jawbone.

Shares of Fitbit have declined 2.4% year to date, underperforming the 18.1% rally of the industry it belongs to.

Litigation Details

The two companies have been embroiled in a legal battle since May 2015, when Jawbone accused Fitbit of poaching employees and stealing critical proprietary information. Jawbone said in its complaint that Fitbit had hired five of its employees who brought over 350,000 confidential files, which included information on materials, sensors and details of cost structure and profits.

Fitbit’s reputation suffered because of the lawsuit. It would have also lost significant wealth had it not settled the lawsuit. At the start of this year, the company’s shares witnessed a significant decline because of the lawsuit.

On Friday, Fitbit and AliphCom came to a global settlement agreement, thus resolving the outstanding litigation between the parties for an undisclosed amount. The development was cheered by investors as for the first time since late January, the company’s shares closed above $7.  In fact, its shares gained 3.9% in midday trading on Monday.

Fitbit, Inc. Revenue (TTM)

Fitbit, Inc. Revenue (TTM) | Fitbit, Inc. Quote

Bottom Line

Though Fitbit enjoys a leading position in the wearable space, the cut-throat competition in both the high- and low-end product ranges cannot be denied.

The recent settlement should help the company in regaining its lost reputation and also save it from incurring huge monetary losses.

Zacks Rank & Stocks to Consider

Fitbit has a Zacks Rank #3 (Hold).

Orbotech Ltd. ORBK, Aehr Test Systems AEHR and Keysight Technologies Inc.KEYS are some of the better-ranked stocks in the same industry. While Orbotech sports a Zacks Rank #1 (Strong Buy), Aehr Test Systems and Keysight carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Orbotech, Aehr Test Systems and Keysight is projected to be 18.75%, 20% and 8.19%, respectively.

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