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Why Is Fitbit (FIT) Down 2.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Fitbit (FIT - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Fitbit due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fitbit Q2 Loss Narrower Than Estimated, Revenues Beat

Fitbit, Inc. reported second-quarter 2020 adjusted loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 21 cents.

The company’s total revenues came in at $261.3 million, down 16.7% year over year. However, the figure surpassed the Zacks Consensus Estimate by 28.2%.

Let’s check out the numbers in detail.

Top-Line Details

During the second quarter, Fitbit sold 2.5 million wearable devices, down 28.6% year over year.

The average selling price increased 16% from the prior-year level to $100 per device for the second quarter. This was primarily driven by a higher percentage of sales through the Fitbit.com channel, which grew 102% year over year to $66 million.

Geographically, revenues from the United States accounted for 63% of second-quarter revenues and decreased 9% year over year.

On a year-over-year basis, international revenues declined 27% to $97 million.  Revenues from Americas — excluding the United States — declined 45% to $10 million, and that of APAC and EMEA was down 47% and 17% year over year to $14 million and $72 million, respectively.

Operating Results

Non-GAAP gross margin was 37.6%, up 200 basis points year over year. Gross margins were driven by higher average selling price, favorable mix, and a decrease in excess and obsolete inventory write-downs.

Non-GAAP operating expenses were 143 million, down 11% from the year-ago quarter. The decrease was due to lower marketing costs and customer service expenses.

Non-GAAP operating loss was $42.2 million compared with a loss of $44.9 million in the year-ago quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents & marketable securities were $448.2 million compared with $427.7 million in the first quarter.

Accounts receivables were $215.4 million compared with $182.3 million in first-quarter 2020.

Cash flow from operations was $32.5 million and free cash flow totaled $27.5 million in the second quarter of 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -5.56% due to these changes.

VGM Scores

Currently, Fitbit has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Fitbit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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