Fitbit Stock Has Many Challenges Ahead
Fitbit Inc (NYSE:FIT) stock has lost more than 70% in the last year, as the wearables maker struggles with its product issues and lower demand amid increasing competition.
However, reports have come in that could buoy FIT stock in the short term.
As per the latest reports, Fitbit is in the process of acquiring smartwatch-maker Pebble in a deal that will likely be the end of the Pebble brand. The sale price will be between $34.0 million and $40.0 million. Fitbit stands to gain intellectual property and other expertise from this acquisition. (Source: “Fitbit is buying Pebble for $34-40 million,” VentureBeat, November 30, 2016.)
Fitbit is desperately looking to get its act together after not meeting expectations and struggling with growing competition in the wearable tech space. Fitbit stock made its debut last year at an initial public offering (IPO) price of $20.00 and on Thursday, FIT stock is trading at a little over $8.00.
Pebble has been struggling financially, although it is a pioneer in the smartwatch space. It launched its first smartwatch in 2012, even before Apple Inc. (NASDAQ:AAPL) introduced its “Apple Watch.” While Pebble has a good following among software developers who love its open app platform, the company has struggled with making its smartwatch a financial success. Pebble’s operating system is likely to be the biggest gain for Fitbit.
The fitness band maker had announced its third-quarter results last month, and Fitbit stock was hit badly, due to the company missing its revenue target and having a lower guidance. Fitbit management also said that the company was facing manufacturing problems in ramping up its new “Flex 2” device.
Together with supply constraints and problems in emerging markets, the company issued a lower-than-expected fourth-quarter outlook. Fitbit stock was hammered for having missed the holiday season opportunity.
In January of this year, FIT stock plunged below its IPO price of $20.00 for the first time. This was due to disappointment surrounding the new product launch by the company, called the “Blaze.” This smartwatch was to compete with the Apple Watch, and it was introduced at a competitive price of $199.00. But it lacked some advanced features that were present in other smartphone offerings.
Fitbit stock is still a far cry from its 52-week high of $34.68. The company’s management is hopeful that the Flex 2 problems will be resolved by the end of December. Investors will be looking at that, as well as a formal announcement by Fitbit Inc. Until then, these reports may help lift FIT stock.