After Fitbit (FIT) yesterday introduced two new fitness wristbands - Fitbit Charge 2 and Fitbit Flex 2 - and unveiled new software features for its existing products, Morgan Stanley was upbeat about the news. The firm predicted that Fitbit would have a very good holiday season and report "strong" fourth quarter results. NEW PRODUCTS SEEN AS POSITIVE: Fitbit's new products should enable it to report "strong" fourth quarter results, wrote Morgan Stanley analysts Jerry Liu and Katy Huberty. Charge 2's display is four times larger than the previous model and it has "numerous new software features," including multi-sport tracking, the analysts wrote. Flex 2 is 30% smaller than its predecessor and is "swim-proof," they noted. Moreover, the company has added many new accessories, which should increase its revenue per device and margins over time, Liu and Huberty predicted. Meanwhile, the products' newer features have made them more personalized, which should increase Fitbit's user engagement and retention levels, the analysts stated. FITBIT CHECKS POSITIVE: Statements by Best Buy (BBY) and other retailers indicate that Fitbit is poised to have "a strong holiday season," the analysts stated. They kept a $31 price target and Overweight rating on the shares. WHAT'S NOTABLE: Fitbit's new products will increase the competitive pressure on Garmin (GRMN), which also makes fitness trackers, warned Goldman Sachs' Simona Jankowski. She reiterated a Sell rating on the name. PRICE ACTION: In late morning trading, Fitbit rose 3% to $15.40, while Garmin dipped 0.6% to $49.85 per share.
Research firm Pacific Crest changed three of its ratings in the IT security space, as the firm upgraded Barracuda (CUDA) and Fortinet (FTNT) to Overweight and downgraded Imperva (IMPV) to Sector Weight. IMPROVED OUTLOOK SEEN AT BARRACUDA: Barracuda's trends and outlook have improved, wrote Pacific Crest analyst Rob Owens, who upgraded the stock to Overweight from Sector Weight. The company is benefiting from changes it has made to its product, stronger demand for virtualized products, and a channel marketing campaign that emphasizes the cloud, Owens believes. Also boosting Barracuda's outlook are the "leading" cloud-based solutions it provides for small and medium businesses and its "fast-growing" recurring revenue, according to Owens. Over the long-term, Barrcauda should become "the security vendor of choice" for low-end purchasers, and in the near-term estimates for the company are "conservative," wrote Owens, who set a $30 price target on the shares. FORTINET INITIATIVE SEEN AS PROMISING: Fortinet's commitment to improving its profitability through cost cutting is "promising" and should be well-received by the market, Owens believes. The analyst praised the company's decision to invest more money in targeting the upper-end of the small and medium business market while reducing the amount it spends on marketing to the large enterprise market, which he called "highly competitive." Fortinet's solutions aside from its flagship FortiGate offering are gaining traction, stated the analyst, who placed a $47 price target on the shares. IMPERVA FUNDAMENTALS "CHALLENGED": Imperva's fundamentals are "challenged," and they are unlikely to rebound "anytime soon" if the company does not sell itself, Owens wrote. Moreover, Imperva has experienced a high rate of employee turnover in recent months, further reducing the chances of its performance rebounding in the near-term, added the analyst, who downgraded the stock to Sector Weight from Overweight. OTHERS TO WATCH: Other publicly traded companies in the space include Check Point (CHKP), F5 Networks (FFIV), FireEye (FEYE),Palo Alto Networks (panw), Proofpoint (PFPT), Qualys (QLYS) and Symantec (SYMC). PRICE ACTION: In morning trading, Barracuda rose 3.5%, Fortinet advanced 2% and Imperva slid 1.3%.