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Fitbit Inc (FIT), GrubHub Inc (GRUB) Pull Apart, Show Tech IPO Dangers

Fitibit inc grubhub inc head in opposite directions

Fitbit Inc (NYSE:FIT) and GrubHub Inc (NYSE:GRUB), firms that formed two of the biggest tech IPOs of the last year, are heading in opposite directions on Wednesday’s market. The firm’s paths owed a lot to Wall Street research reports on the performance of their businesses ahead of June earnings. They owed more, however, to the nature of the tech IPO in 2015.

Fitibit inc grubhub inc head in opposite directions

At time of writing shares in Fitibit were selling for $39.27, up 3.1 percent for the day so far. Shares in GrubHub were down 4.75 percent to $32.46. Earlier today a report on the fast-food finder showed that key metrics, including traffic, were turning against it as competing firms stepped in. Meanwhile a Tuesday report on Fitbit showed that sales were strong despite the release of the Apple Watch.

Wall Street plays Fitbit, GrubHub

The fortunes seen in the charts of both Fitbit and Grubhub reflect those of many tech firms after their IPOs. First there’s a charge higher, seen in Fitbit which just went public last month, as more investors hear about the tech and why it matters. This is followed by a fall, as investors question the future of the firm, usually after poor earnings, or a bad Wall Street summation.

The path after that fall depends very much on the business at hand. Grubhub, which went through its IPO last year, just fell below its price on close of IPO day today. GoPro Inc (NASDAQ:GPRO) another newly public firm, hit that level earlier on this year but bounced back after showing off a range of new product ideas.

Other firms have not been so lucky, however. Zynga Inc (NASDAQ:ZNGA) never got near its IPO price after it spiked and crashed right after going public and Groupon Inc (NASDAQ:GRPN) has met the same fate. Even GoPro, which has a solid plan for the medium term in the market’s eyes, may not be able to make it if it stumbles again.

Fitbit, Grubhub head in opposite directions

For today it’s clear which point in the path that Fitbit and Grubhub are on. If Grubhub does not manage to come out strongly after this month’s earnings report, it may never recover from the shock of the last month. Fitbit is in the midst of a post-IPO rush. It’s up close to 35% since closing on its first day, and today has been its best day on the market in quite a while.

That has been driven, however, by a report which showed that sales have not been harmed by the release of the Apple Inc. (NASDAQ:AAPL) Watch. Slice Intelligence showed, in a report issued on June 30, that the firm’s sales had beaten those of the Watch since the release of Tim Cook’s wearable.

As Apple improves the device, however, and other competing gadgets emerge, Fitbit may see growth slow and the market turn against it, just as it turned against Grubhub in recent days. Those with shares in the fitness firm will be hoping that it’s able to follow in the footsteps of GoPro, rather than in those of Zynga and Groupon.

On Wall Street the 3 analysts with price targets have a median price of $44 on the firm’s stock, more than 10% above today’s price. Even after today’s decline the 15 voices offering a price target on Grubhub see the stock rising to $50 per share according to their median price target.

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