Fitbit Inc. (NYSE: FIT) stock hits the market tomorrow, June 18, and it is already one of the most anticipated tech IPOs of 2015 so far.
With all the hype surrounding the deal, people are wondering, "Should I buy Fitbit stock?"
Here's a closer look at the Fitbit IPO and Fitbit stock...
Everything You Need to Know About the Fitbit IPO
Fitbit originally set a price range of $14 to $16 a share for its IPO. At the midpoint of the range, the Fitbit IPO would have raised $448 million by selling 29.85 million shares.
But the company increased its range and deal size yesterday (Tuesday). The price range is now $17 to $19 and the IPO will raise $621 million. That's about 39% more than the original amount.
Following the IPO, Fitbit will command a valuation of roughly $3.7 billion. That ties it with Black Knight Financial Services Inc. (NYSE: BKFS) as the most valuable tech IPO of the year. Lagging slightly behind them are Inovalon Holdings Inc. (Nasdaq: INOV) at $3.4 billion and GoDaddy Inc. (NYSE: GDDY) at $3 billion.
How Fitbit Makes Money
Founded in San Francisco in 2007, Fitbit is a consumer electronics company known for its wearable devices of the same name. Its goal is to make products that "fit seamlessly into your life so you can achieve your health and fitness goals, whatever they may be."
Fitbits are wireless activity trackers that measure health metrics like quality of sleep, number of steps walked, and calories burned. The six different models include the Zip, One, Flex, Charge, Charge HR, and Surge.
The products caused controversy last year when the company had to recall the Fitbit Force. The recall came after roughly 9,900 customers who purchased the Force experienced skin irritation and rashes. The Consumer Product Safety Commission said it was caused by "allergic contact dermatitis." The Fitbit Force has since been discontinued.
But Fitbit still had an incredible year last year. The company's revenue totaled $745.4 million in 2014 - a nearly 175% increase from $271.1 million in 2013. There were 10.4 million Fitbits sold last year and 7 million sold last quarter alone.
With all of these strong numbers, the big question is...
Should I Buy Fitbit Stock?
Fitbit is one of the few tech companies that has turned a profit before hitting the market. It swung from a loss of $4.3 million in 2011 to a profit of $131.8 million in 2014.
With its strong profitability and trendy products, Fitbit stock could be a healthy investment down the road.
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
But we strongly recommend waiting until after the Fitbit IPO to consider investing in FIT stock. That's because buying new stocks right after they hit the market typically isn't a good idea for retail investors.
You see, popular IPOs are usually reserved for institutional investors willing to buy huge quantities of the stock. These Wall Street "VIPs" usually sell the stock off by the time retail investors could buy into it.
Not to mention most of these deals are accompanied by hype that overshadows the facts.
"Too many investors hear of a 'hot IPO' and try to get in on the action without doing any homework at all," Money Morning Defense & Tech Specialist Michael A. Robinson explained. "That's a recipe for a hefty loss."
Etsy Inc. (Nasdaq: ETSY) is a perfect example of an overhyped IPO. The online marketplace company returned 87.5% on its first day. At the time, it was considered one of the most popular IPOs of 2015.
Since then, ETSY stock has crashed 45.6% and is considered the worst IPO of the year.
Any retail investor who jumped in at the very beginning is likely looking at hefty losses.
I will be live tweeting the Fitbit IPO tomorrow. Follow me on Twitter at @AlexMcGuire92 for constant updates on FIT stock's debut.
More on the Fitbit IPO: The Fitbit share price will most likely soar when the company hits the market tomorrow. But its long-term performance depends on its ability to hold onto its 85% share of the wearable tech market. There's one huge competitor with a similar product has the potential to ruin FIT stock down the road...