Fitbit delivered the opposite of the quarterly report "trifecta" that we love to see, namely, an earnings beat, a revenue beat, and raised guidance.
FIT disappointed on all three metrics and you would think the stock would have cratered below $5. But the good news is that the company had already warned about the holiday quarter being destined to underwhelm back in early November.
During that conference call, the company explained a coming period of transition and the stock dropped 35% from $13 to $8.50. It has slowly drifted lower since then and actually tried to rally a bit above $6 last week as almost all the bad news has been priced-in and investors are focused on that transition.
Writing for Barron's, Alex Eule summed up the situation well on February 22...
Fitbit Needs New Steps to Restore Health
"The numbers suggest things might get better as the year progresses. For the full-year, Fitbit's revenue remains on track with analyst estimates. Cost cuts -- the company recently eliminated 6% of its workforce -- could be helping the company. Fitbit is now projecting it will lose between 22 cents and 44 cents this year. The midpoint of that loss (33 cents) is better than the 39 cent loss analysts have been predicting.
"The big story during this transition will be smartwatches. Fitbit says it's entering the smartwatch category 'to invigorate and capture a large addressable market by leveraging Fitbit's brand and vast experience delivering a best-in-class health and fitness experience on the wrist.'"
Worth a Flyer?
According to StreetInsider.com, Oppenheimer analysts like the transition plan but it's the execution that remains "questionable." The investment bank cited that with a market cap of just $1.3 billion, cash balance north of $700 million, 26 million active users, and leading market share in digital health trackers, they do not see much downside from here.
"We believe the stock currently prices in a near worst-case scenario. It's worth a flyer; maintain Outperform and PT of $8."
While that positive outlook may help put a bottom in the shares around $6, I'm waiting for the earnings estimates to turn back up before initiating any positions here. The Zacks Rank will let you know.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Bear of the Day: Fitbit (FIT)
Fitbit delivered the opposite of the quarterly report "trifecta" that we love to see, namely, an earnings beat, a revenue beat, and raised guidance.
FIT disappointed on all three metrics and you would think the stock would have cratered below $5. But the good news is that the company had already warned about the holiday quarter being destined to underwhelm back in early November.
During that conference call, the company explained a coming period of transition and the stock dropped 35% from $13 to $8.50. It has slowly drifted lower since then and actually tried to rally a bit above $6 last week as almost all the bad news has been priced-in and investors are focused on that transition.
Writing for Barron's, Alex Eule summed up the situation well on February 22...
Fitbit Needs New Steps to Restore Health
"The numbers suggest things might get better as the year progresses. For the full-year, Fitbit's revenue remains on track with analyst estimates. Cost cuts -- the company recently eliminated 6% of its workforce -- could be helping the company. Fitbit is now projecting it will lose between 22 cents and 44 cents this year. The midpoint of that loss (33 cents) is better than the 39 cent loss analysts have been predicting.
"The big story during this transition will be smartwatches. Fitbit says it's entering the smartwatch category 'to invigorate and capture a large addressable market by leveraging Fitbit's brand and vast experience delivering a best-in-class health and fitness experience on the wrist.'"
Worth a Flyer?
According to StreetInsider.com, Oppenheimer analysts like the transition plan but it's the execution that remains "questionable." The investment bank cited that with a market cap of just $1.3 billion, cash balance north of $700 million, 26 million active users, and leading market share in digital health trackers, they do not see much downside from here.
"We believe the stock currently prices in a near worst-case scenario. It's worth a flyer; maintain Outperform and PT of $8."
While that positive outlook may help put a bottom in the shares around $6, I'm waiting for the earnings estimates to turn back up before initiating any positions here. The Zacks Rank will let you know.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>