Fitbit Stock Rallies After Analyst Cites Healthcare Potential

Wedbush thinks there's major potential for Fitbit in healthcare

Fitbit Inc (NYSE:FIT) is trading up 7.3% at $4.83, after Wedbush upgraded the stock to "outperform" from "neutral" and set a $6.50 price target, citing potential tailwinds from the company's push into the healthcare space. In particular, the analyst note highlighted Fitbit's collaboration with Google.

FIT shares showed signs of life early in the year, peaking at $7.79 back in June, but they've since sold off. Specifically, yesterday the stock hit an all-time low of $4.46 before closing right at $4.50, the site of its lows from earlier this year. Even without the analyst attention, the equity was technically was due for a bounce following the recent market pullback, with its 14-day Relative Strength Index (RSI) sitting down at 24 -- deep in oversold territory.

Sentiment remains very bearish on the security overall. Just two of the 12 covering brokerage firms recommend buying FIT stock, though the average 12-month price target of $6.39 is a substantial premium to current levels.

Meanwhile, short interest remains elevated, accounting for essentially 20% of Fitbit's float. If you go by average daily trading volumes, it'd take these bears almost eight sessions to cover -- so the potential for a short squeeze is there if FIT can ever sustain a rally.

Short sellers could be attributing to heavy call trading in the options pits, as they look to hedge against an unexpected upside move, like today. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), almost 17,000 calls were bought to open, compared to just 3,900 puts.