Research firm Pacific Crest upgraded wearables makers Fossil (FOSL) and Fitbit (FIT) in notes to investors this morning, taking the prior up to "buy" and the latter up to a "hold" equivalent rating. The firm thinks that Fossil will benefit from the "strong momentum" of wearables, and it believes that Fitbit's stock now better reflects the difficulties faced by the company.

FOSSIL: Consumers appear to be very eager to buy new wearables, wrote Pacific Crest analyst Edward Yruma. Strong demand for Fossil's wearables should enable its financial results to reach a positive turning point, the analyst predicted. Yruma believes that Fossil's sales of such devices will reach $175M-$225M over the next year, possibly boosting its earnings per share by 50c or more. Eventually wearables could generate over $1B in revenue for the company, added the analyst. He upgraded the stock two notches, to Overweight from Underweight, and set a $42 price target on the shares.

FITBIT: Meanwhile, Pacific Crest analyst Brad Erickson upgraded Fitbit to Sector Weight from Underweight. Erickson continues to believe that the company will be hurt by the "maturity" of wearables. However, he says that the stock, after declining significantly over the past seven weeks, now better reflects his "skepticism" about the company. Moreover, the stock could experience "significant volatility unrelated to fundamentals" going forward, according to the analyst. As an example of such volatility, he pointed to a "potentially fictitious bid" to acquire the company that was included in an SEC filing last week. Erickson says that Fitbit's stock has a fair value of about $8.

PRICE ACTION: In late morning trading, Fossil jumped 8% to $35.55 and Fitbit slid 0.2% to $9.54 per share.