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The year 2016 has been disastrous for fitness wearable maker Fitbit Inc with its shares down 75.4% on a year-to-date basis. In comparison, the Zacks Electronics Measuring Instruments industry has posted a decline of 15.84%. Notably, the stock has fallen almost 74% since its Initial Public Offering (IPO) in Jun 2015.
The company lost momentum at the very beginning of the year, when it’s newly launched fitness band – Blaze – failed to impress investors. The device was criticized due to its similarity to smart wearables from the likes of Apple (AAPL - Free Report) , Under Armour and Garmin (GRMN - Free Report) . Shares plunged more than 18% on Jan 5, after the company unveiled Blaze at the Consumer Electronic Show (CES) at Las Vegas.
Fitbit shares never fully recovered since the incident, despite strong top-line growth in the last couple of quarters and increasing adoption of new devices like Blaze, Alta, Flex 2 and Charge 2. This can primarily be attributed to a saturating fitness tracker market, increasing competition and supply chain concerns.
Further, multiple lawsuits related to Fitbit’s heart rate tracking and sleep tracking technology dented its reputation.
Higher Spending, Asia-Pacific Growth Concerns
Investors were worried that intensifying competition in the fitness tracker market would hinder Fitbit’s growth prospects. In order to remain competitive, the company had to increase spending on research & development (R&D). Moreover, profitability was expected to be hurt due to increased costs of producing and marketing new devices.
Fitbit’s year-to-date results have validated these concerns. While revenues increased almost 39% on a year-over-year basis in the nine months ended Oct 1, 2016. R&D and Sales & Marketing expenses surged 145.4% and 70.7%, respectively. As a result, earnings declined to 18 cents per share as compared with 48 cents reported in the year-ago period.
It is also notable that Fitbit’s top-line growth (down 11.3%) stalled at Asia-Pacific in the last nine months due to increasing competition from regional brands.
Furthermore, supply chain issues related to production of Flex 2 fitness tracker impacted Fitbit’s ability to cash-in the holiday season demand. This apparently was the prime reason behind Fitbit’s absence in Amazon’s recently published Best-Seller List this Holiday Season. Notably, Fitbit Charge was one of the most popular items on Amazon in 2015 holiday season.
Is a Rebound Possible in 2017?
Reportedly, Fitbit is the second-most popular application in Apple App store and the eighth in Google Play. Moreover, per IDC, including all “wearables” Fitbit is still #1 followed by Samsung, Garmin, and Apple in terms of market share. In spite of all the gloominess surrounding the stock, these are encouraging facts for the company’s investors as we enter 2017.
Between 2016 and 2020, IDC estimates that the total number of basic wearables will grow at a CAGR of 20.2%, while smart wearables will grow at a CAGR of 30.6%. This provides a significant growth opportunity for Fitbit post Pebble acquisition.
Pebble has one of the largest app ecosystems that any wearable can boast of and the inclusion of third-party apps will surely boost Fitbit’s brand value in the smart wearables market going ahead. Moreover, partnerships with established medical devices company like Medtronic are likely to expand Fitbit’s customer base. This can eventually help the company’s shares to rebound in 2017.
We note that Nova’s current year earnings estimates has surged 19 cents to 93 cents in the last 60 days.
Zacks' Top 10 Stocks for 2017
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Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Is There Hope for FitBit (FIT) Investors in 2017?
The year 2016 has been disastrous for fitness wearable maker Fitbit Inc with its shares down 75.4% on a year-to-date basis. In comparison, the Zacks Electronics Measuring Instruments industry has posted a decline of 15.84%. Notably, the stock has fallen almost 74% since its Initial Public Offering (IPO) in Jun 2015.
The company lost momentum at the very beginning of the year, when it’s newly launched fitness band – Blaze – failed to impress investors. The device was criticized due to its similarity to smart wearables from the likes of Apple (AAPL - Free Report) , Under Armour and Garmin (GRMN - Free Report) . Shares plunged more than 18% on Jan 5, after the company unveiled Blaze at the Consumer Electronic Show (CES) at Las Vegas.
Fitbit shares never fully recovered since the incident, despite strong top-line growth in the last couple of quarters and increasing adoption of new devices like Blaze, Alta, Flex 2 and Charge 2. This can primarily be attributed to a saturating fitness tracker market, increasing competition and supply chain concerns.
Further, multiple lawsuits related to Fitbit’s heart rate tracking and sleep tracking technology dented its reputation.
Higher Spending, Asia-Pacific Growth Concerns
Investors were worried that intensifying competition in the fitness tracker market would hinder Fitbit’s growth prospects. In order to remain competitive, the company had to increase spending on research & development (R&D). Moreover, profitability was expected to be hurt due to increased costs of producing and marketing new devices.
Fitbit’s year-to-date results have validated these concerns. While revenues increased almost 39% on a year-over-year basis in the nine months ended Oct 1, 2016. R&D and Sales & Marketing expenses surged 145.4% and 70.7%, respectively. As a result, earnings declined to 18 cents per share as compared with 48 cents reported in the year-ago period.
FITBIT INC Price and Consensus
FITBIT INC Price and Consensus | FITBIT INC Quote
It is also notable that Fitbit’s top-line growth (down 11.3%) stalled at Asia-Pacific in the last nine months due to increasing competition from regional brands.
Furthermore, supply chain issues related to production of Flex 2 fitness tracker impacted Fitbit’s ability to cash-in the holiday season demand. This apparently was the prime reason behind Fitbit’s absence in Amazon’s recently published Best-Seller List this Holiday Season. Notably, Fitbit Charge was one of the most popular items on Amazon in 2015 holiday season.
Is a Rebound Possible in 2017?
Reportedly, Fitbit is the second-most popular application in Apple App store and the eighth in Google Play. Moreover, per IDC, including all “wearables” Fitbit is still #1 followed by Samsung, Garmin, and Apple in terms of market share. In spite of all the gloominess surrounding the stock, these are encouraging facts for the company’s investors as we enter 2017.
Between 2016 and 2020, IDC estimates that the total number of basic wearables will grow at a CAGR of 20.2%, while smart wearables will grow at a CAGR of 30.6%. This provides a significant growth opportunity for Fitbit post Pebble acquisition.
Pebble has one of the largest app ecosystems that any wearable can boast of and the inclusion of third-party apps will surely boost Fitbit’s brand value in the smart wearables market going ahead. Moreover, partnerships with established medical devices company like Medtronic are likely to expand Fitbit’s customer base. This can eventually help the company’s shares to rebound in 2017.
Zacks Rank & Key Picks
Currently, Fitbit has a Zacks Rank #4 (Sell). Nova Measuring Instruments Ltd. (NVMI - Free Report) sporting a Zacks Rank #1 (Strong Buy) is a better-ranked stock in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.
We note that Nova’s current year earnings estimates has surged 19 cents to 93 cents in the last 60 days.
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? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>