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Why Fitbit's New Band Got a Healthy Reception

Fitness band maker has much cheaper multiple as it updates flagship devices.

Sometimes, it’s safer to go with your hits.

Fitbit updated its Charge HR and Flex fitness bands on Monday. The Charge has been the company’s consistent best-seller since its initial launch last year. The new Charge 2 device offers a larger display and more functions than its predecessor while keeping the starting price tag at $150.

The news gave Fitbit’s stock a lift of nearly 2% Monday. That is a sharp contrast with the 18% hit the stock took the day the company unveiled its Blaze smartwatch in January. That device sparked unflattering comparisons with the Apple Watch and fueled a persistent debate about the longevity of Fitbit’s offerings in a field growing ever more competitive.

The newest devices won’t settle that debate for some—not with 30% of the stock sold short. But Fitbit’s operating history thus far suggests a stronger place for its products than many assume. On a unit basis, Fitbit has consistently outsold both the Apple Watch and fitness bands from Xiaomi that start for as little as $15, according to IDC estimates. The addition of the Blaze smartwatch also helped boost the company’s average selling price in the second quarter by 13%, year over year.

Fueling that growth through research and marketing has been costly, thinning Fitbit’s margins in the first half of this year. Whether or not the company can fatten them up again in the second half remains a risk. But at a slimmed-down multiple of 11 times forward earnings, compared with 26 times at the start of the year, Fitbit has much less to trip over.

Write to Dan Gallagher at dan.gallagher@wsj.com

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