Fitbit acquisition gives Alphabet Inc. (NASDAQ:GOOG) a bridge to the $3 trillion health care market
Alphabet GOOGL, owner of Google, announced last week that it would be acquiring wearable fitness company Fitbit FIT, for roughly $2.1 billion. The move ramps up the competition in the wearables space as tech giants elbow for market share. Google’s Silicon Valley neighbor, Apple AAPL, reported last week that its wearable sales have become a larger contributor to the tech titan’s overall business.
Fitbit shares rose over 15% in response to the news of the acquisition. As Google announces its arrival in the wearables space, investors may wonder whether it can compete with Apple’s growing wearables revenues.
Can Google Turn Around the Struggling Company?
Google will spend just a sliver of its $121 billion cash hoard to branch out in the hardware space with Fitbit’s products. Fitbit was founded in 2007 and has cratered since its 2015 IPO. The company has struggled to gain traction as Apple has dominated the smart watch market with its Apple Watch. Apple’s massive head start within the smart watch industry is a prominent obstacle Google will have to address.
Nonetheless, the Fitbit acquisition gives Google a bridge to the $3 trillion health care market. Google also provides the resources for Fitbit to expand and ultimately better compete in its highest capacity. Fitbit has sold about 100 million devices with around 28 million currently in use; its devices gather data on user’s health tendencies, which can be particularly valuable information for medical researchers and health insurers.
However, using Fitbit’s technology to collect sensitive data about user’s health was met with scrutiny, as Google is already under investigation for its competitive practices and advertising business. In anticipation of the potential backlash, Google said it wouldn’t use Fitbit data to help power its massive online advertising business. Rick Osterloh, who is the head of Google’s hardware division, stated “Similar to our other products, with wearables, we will be transparent about the data we collect and why.” Osterloh also said that Google would give users the choice to review, move, or delete their data.
Google is at heart an advertising company with over 80% of its revenue attributed to ads. Health data is a particularly sensitive entity that Google will have access to, which might spook off potential and current users. Salvaging its public image will be Google’s first task before it can focus on revamping Fitbit’s sales.
If the tech giant can figure out a way to regain the public’s trust, then transferring the data from the devices to medical professionals can make the deal worthwhile. Fitbit co-founder, James Park, stated “with Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone.” The two companies said that the deal is expected to be finalized sometime next year.
Google’s path to making the Fitbit acquisition worthwhile may be a long journey, but the buyout gives Google a presence in the lucrative health care market. There is a lot of good Google can do with the data collected on the Fitbit device, as it can provide valuable insights to medical professionals about broader health trends. It can also use the health data to help train artificial intelligence programs to better understand human health. Alphabet sits at a Zacks Rank #3 (Hold).
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1,219.09.
The projected upper bound is: 1,334.59.
The projected lower bound is: 1,253.76.
The projected closing price is: 1,294.17.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 52.1248. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 66.12. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 177.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 14 period(s) ago.
Rex Takasugi – TD Profile
ALPHABET INC C closed up 17.630 at 1,291.370. Volume was 10% above average (neutral) and Bollinger Bands were 11% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,266.72 1,224.46 1,169.63
Volatility: 21 21 30
Volume: 1,476,452 1,300,650 1,438,376
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
ALPHABET INC C gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALPHABET INC C is currently 10.4% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GOOG.O and have had this outlook for the last 13 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.
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