Why Fitbit Stock Sank Today


What happened

Shares of Fitbit (NYSE: FIT) slumped on Thursday after the wearables specialist reported its fourth-quarter results. While the company beat analyst estimates for both revenue and earnings, it issued disappointing guidance. As of 11:30 a.m. EST, the stock was down about 12.7%.

So what

Fitbit reported fourth-quarter revenue of $571.2 million, up 0.1% year over year and around $2 million above the average analyst estimate. Fitbit sold 5.6 million devices, up from 5.4 million in the prior-year period. Average selling price declined 2% year over year to $100, pushed down by the launch of the Charge 3 fitness tracker.

For the full year, 44% of Fitbit’s revenue came from smartwatches. That’s up from just 8% in 2017. Fitbit launched the affordable Versa smartwatch in 2018, providing a low-cost alternative to the Apple Watch.

Non-GAAP earnings per share came in at $0.14, up from a loss of $0.02 in the prior-year period and $0.07 better than analysts were expecting. Gross margin tumbled due to the shift toward smartwatches, but much lower operating costs pushed up the bottom line.

Now what

Fitbit had a decent holiday quarter, but its guidance overshadowed those results. First-quarter revenue is expected between $250 million and $268 million, up 1% to 8% year over year. Devices sold will increase, but average selling price will decrease. Analysts were expecting revenue of $272.3 million.

READ:  Warren Buffett's Berkshire Hathaway, Salesforce back Snowflake IPO

First-quarter non-GAAP EPS is expected to be a loss between $0.22 and $0.24, exceeding analyst estimates for a loss of $0.15 per share.

For the full year, Fitbit sees revenue between $1.52 billion and $1.58 billion, up 1% to 4%, along with a free cash flow loss between $40 million and $70 million. Analysts were expecting revenue of $1.57 billion.

Fitbit’s turnaround is going to take time, as evidenced by its weak guidance. The company managed to produce positive free cash flow in 2018, but that included a substantial benefit from working capital. That won’t repeat to the same degree this year.

While Fitbit’s Versa smartwatch appears to be a success, slumping tracker sales are still weighing heavily on the company’s results.

10 stocks we like better than FitbitWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Fitbit wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 1, 2019

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AAPL and Fitbit. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.

READ:  IRS has $1.3B in unclaimed tax refunds. Time is running out to collect it


View more information: https://www.foxbusiness.com/markets/why-fitbit-stock-sank-today

See more articles in category: Finance

Leave a Reply

Back to top button