Turbulence at bulletin board favourite Fitbug (FITB:AIM) is continuing after the wearable fitness tracker maker announced the immediate stepping down of its finance director. We think the market has failed to appreciate the impressive progress it has made and believe it’s an opportune time to take advantage of the current share price weakness.

The £12 million cap saw its share price spike 16-fold in less than a month last October after it secured two major deals with Sainsbury’s (SBRY) and US discount chain Target (TGT:NYSE) to stock its Orb activity device. The shares have since dropped from their peak of 20p to 4.9p, mainly due to its ongoing trademark action against US rival Fitbit which at one stage wiped 40% off Fitbug’s value.

Fitbug spent £742,000 on legal fees last year which, together with investing in the development of its digital coaching platform Kiqplan, caused its pre-tax loss to widen to £3.8 million from £2.6 million a year earlier.

The shares lost 4% on 27 May when Fitbug announced its finance director Andrew Brummer is leaving after six years but we think this could be a positive step in the long-term. Investors have been calling for change for some time and a new finance director could result in better management of the finances.

The focus on Fitbug’s legal dispute has detracted from the progress the company has made with launching new products and entering new partnerships. Last year Fitbug signed sales agreements with a string of blue chip retailers and got Kiqplan integrated into Samsung’s (005930:KS) digital health platform, named official fitness partner of the Cancer Research Race for Life 2015 and added on to the Jawbone Marketplace (which is currently suing Fitbit for allegedly stealing commercially sensitive data).

These agreements drove revenue up 208% in 2014 and the growth looks set to continue. This year Fitbug has signed a sales agreement with US Midwest retailer Meijer and increased its Kiqplan programmes from four to 10. It has also boosted its presence in the B2B market by partnering with Towers Watson in the Asia Pacific and Punter Southall in the UK.

Fitbug has a rich prospect pipeline which together with the slew of new distribution channels will hopefully result in the group’s pre-tax loss narrowing in 2015.

The speed at which Fitbug is signing agreements with big names in retail and technology hasn’t been fully appreciated by the market. We see scope for growth over the medium-term once the legal furore has dissipated.

SWOT ANALYSIS

STRENGTHS

• Deals with major retailers

• Good contract pipeline

• Continuous product development

WEAKNESSES

• Loss making

• Share price turbulence

• Relatively small player

OPPORTUNITIES

• Secure further deals and partnerships

• Build significant user base for Kiqplan

• Win trademark dispute against rival Fitbit

THREATS

• Can’t keep up with technological development and competition

• Loses legal case against Fitbit

• Unable to secure further deals and partnerships