Fitbit Inc: What’s Killing FIT Stock?

fitbit stockWhat’s Forcing Fitbit Stock Down? 

Fitbit Inc (NYSE:FIT) stock took a dramatic fall on Wednesday during after-hours trading when the company failed to meet analysts’ estimates, tumbling 30%.

Fitbit leads in the market for wearable devices, according to IDC Research, Inc. Fitbit is known for calorie and heart-rate monitoring bracelets that measure the wearer’s vitals during exercise.

Recent years, however, have seen an expansion in the wearable market, with rivals like Xiaomi, Samsung Electronics Co Ltd, Apple Inc. (NASDAQ:AAPL), and others getting into the space. Rival products were the key to Fitbit’s revenue falling short of expectations, hitting $503.8 million in the third quarter versus analysts’ expectations of $506.9 million. Net income fell to $26.1 million from $45.8 million. (Source: “Fitbit forecasts dismal holiday quarter, shares sink,” Reuters, November 2, 2016.)

And to make matters worse, Fitbit has lowered its revenue expectations for the all-important holiday-season fourth quarter. Consumer products like Fitbit’s wearables expect to have strong showings in the gift-giving season, which explains analysts’ estimates of $985.1 million in revenue for the fourth quarter. But with this recent dip, Fitbit has projected a revenue range of $725.0 million to $750.0 million.

FIT stock’s full-year revenue guidance range also lowered to between $2.32 billion and $2.4 billion, short of analysts’ expected mark of $2.6 billion.

The market has not been kind to Fitbit, ever since it went public in the summer of 2015. FIT stock is now down to around a quarter of its peak value, and it hasn’t been able to gain back any momentum in 2016.

With more and more competition getting into the game, FIT stock faces a tougher holiday season than when it was the dominant wearable tech company in the market, and this challenge has showed through on the most recent quarterly earnings report. Case in point: Fitbit’s shares have fallen about 13.5% since Apple launched its latest smartwatch on September 7. (Source: “Fitbit Takes a Tumble Before the Holiday Quarter,” Fortune, November 2, 2016.)

“We continue to grow and are profitable,” said James Park, Fitbit co-founder and CEO, in a statement following the report’s release. “However not at the pace previously expected. We are focused on improving the utility of our products and integrating more deeply into the healthcare ecosystem and believe we can leverage our brand and community to unlock new avenues and adjacencies of growth.” (Source: “Fitbit Reports Third Quarter Revenue Growth of 23% to $504M, GAAP Diluted EPS of $0.11, and Non-GAAP Diluted EPS of $0.19,” Fitbit Inc, November 2, 2016)

I’m not sure if it was intentional, but the use of the word “pace” in a statement on tech designed to be worn by runners deserves at least a one-point bump on the stock. No? I guess wordplay doesn’t get you as far as it used to.

Be sure to keep up with FIT stock to see how it plays out in the near future.

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