Fitbit Inc. (FIT, Financial) has been a beaten-down stock as it has lost more than 85% of its value since reaching its all-time high in July 2015. Shares of Fitbit are down over 18% year to date. The wearables maker continues losing steam mainly due to reduced guidance, overlooked products as well as mass analyst downgrades that drove its stock into the single digits.
Fitbit reported third-quarter results on Nov. 1. For the quarter, the company posted earnings per share of -1 cent, beating the analysts' estimate by 3 cents. On the other hand, its revenue came in at $393 million, again beating the consensus by $1.3 million.
Despite the beat, the reported revenue represents a drop of 22% year over year. Over the past four quarters, the wearables maker’s revenue has been falling at an average of 30%. Moreover, it is still unclear whether the company will start reporting positive revenue growth anytime soon.
Moving ahead, the company sold around 3.6 million units in the third quarter, a drop of 32% compared with a year ago. Also, its non-GAAP gross margin slipped three percentage points to 45.2%.
On the other hand, Fitbit launched its first full-featured smartwatch, named “Ionic,” last month which comprises features of Blaze, Surge and Charge 2. The new Fitbit Ionic, though, lacks exciting apps and many of the features offered by other smartwatches. One interesting thing about the Fitbit Ionic is its battery life which survives up to four days.
The wearables maker also recently introduced an open SDK grounded on standard web technologies. The new SDK will provide developers with tools to develop apps for wearables as well as access to Ionic’s sensors.
For the current quarter, the company expects its revenue growth in the range of -1% to 5%, and non-GAAP earnings in between a loss of 3 cents and a profit of 1 cent. For the full year, Fitbit anticipates a 25% revenue decline along with a net loss of 23 cents per share, more than double compared to a loss of 12 cents per share last year.
Summing up
Fitbit reached its all-time low in August this year. Since then, the stock has displayed some strong turnaround and is up nearly 20% from its all-time low.
Fitbit did exceed analysts' estimates on both the bottom-line and the top-line front, but it failed to impress investors as its shares plunged more than 4% on the day it reported the third quarter. Although things might look better at present stage than they did earlier, Fitbit is still not a safe investment option.
Fitbit has done a good job by introducing its first full-featured smartwatch, but it faces tough competition from its chief rival Apple Watch 3. In all, I would recommend shareholders to stay away from Fitbit mainly due to its ambiguous future.
Disclosure: No positions in the stocks mentioned in this article.
