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Fitbit (FIT) Shares Down More Than 3% on Watch Launch Delay

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Activity tracker and fitness device maker Fitbit, Inc. has reportedly been facing difficulties with the fabrication of its next smart watch product, which has delayed the launch of its new smartphone.

Following the news, shares of the company were down by 3.29%. Notably, the company’s shares have lost a mammoth 56.5% since Jun 18, 2016, the day on which the company began trading on the New York stock exchange.

Over the last one year, shares of Fitbit have been persistently declining. The stock lost 67.25% compared with the Zacks Electronics - Measuring Instruments industry’s decline of 0.82%.

Why the Fall in Share Price?

As per reports from Yahoo! Finance, Fitbit was to launch its smartwatch this spring, but had to delay it due to certain technical problems.

Firstly, the GPS antenna had to be redesigned to improve signal performance. Secondly, the watch had some issues with the waterproofing feature. Given that waterproofing is an important feature of smarwatches, any compromise on it can impact the company’s sales figures.

Downward Estimate Revisions

For the full year, three estimates moved down in the last 60 days, compared with one upward revision. This resulted in the consensus estimate declining from earnings of 29 cents a share 60 days ago to its current level of a loss of 62 cents.

Also, for the current quarter, Fitbit saw one downward estimate revision, which dragged the consensus estimate to a loss of 25 cents a share from a loss of 5 cents in the last 60 days. 

Conclusion

Fitbit enjoys a leading market position and is a global brand for wearable activity tracking devices and its recent performance proves that.

The company, however, faces competition in both the high and low-end product ranges. At the high-end front, it competes with the Apple (AAPL - Free Report) Watch. Also, many big manufacturers are developing connected devices on Google's (GOOGL - Free Report) Android operating system. At the low end, fitness-tracking devices from Jawbone, Garmin Ltd and Xiaomi also pose tough competition. Recently, Fossil Group also joined the ranks.

Competition is on the rise and it might compel Fitbit to slash prices to maintain market share. This in turn can take a toll on its margins.

Zacks Rank & Stock to Consider

Currently, Fitbit carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is ON Semiconductor Corporation (ON - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For the current year, estimates for ON Semiconductor were up 7.8% in the last 60 days.

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