It has been about a month since the last earnings report for Fitbit, Inc. . Shares have lost about 11.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 drivers.
Fitbit Q4 Loss Greater than Expected, Revenues Miss
Fitbit, Inc. reported fourth-quarter 2016 adjusted loss (excluding all one-time items but including stock-based compensation) of 63 cents per share, which was greater than the Zacks Consensus Estimate of a loss of 61 cents.
Following the weaker-than-expected fourth quarter earnings and poor guidance, shares fell more than 2%.
Increased competition from fitness-device makers like Garmin , Jawbone and Misfit and increased popularity of smart watches leading to slower growth in fitness wearable space, continued to be major headwinds.
At the call, management highlighted some recovery initiatives that are expected to pull the company out from the slower growth. These steps include offering a streamlined set of products, improving software and services to offer more personalization to customers and achieving greater integration into the healthcare ecosystem.
Let’s check out the numbers.
Revenues
Fitbit reported revenues of $573.8 million, which was down 19.4% year over year and 2.2% on a sequential basis. The top line was far below the guidance of $725 million to $750 million and missed the consensus mark of $630 million. The year-over-year decline in revenues was due to weaker demand and higher rebates and seller allowances, partially offset by shipments late in the third quarter.
In the quarter, 6.5 million connected health and fitness devices were sold with products Charge 2, Flex 2, Blaze and Alta accounting for 96% of total revenue. The company started digital health partnerships with leading companies including Medtronic.
Geographically, revenues from the United States accounted for 67% of the fourth quarter revenues, EMEA brought in 23%, Americas excluding the U.S contributed 6% and the remaining 4% came from Asia-Pacific.
Fourth-quarter revenues from the EMEA jumped a massive 100.1%. Asia-Pacific revenues recorded a significant decrease of 201.7%. In the U.S. and the Americas excluding the U.S., revenues decreased 28.3% and 18.4% year over year, respectively.
Margins and Net Income
Gross profit for the fourth-quarter was $127 million. Gross margin was 22.1%, down 1972 basis points (bps) sequentially and 2636 bps year over year.
Gross margin was negatively impacted by charges associated with increased inventory and weaker demand.
Pro-forma net loss was $140.8 million or loss per share of 63 cents as against $31 million or earnings per share of 13 cents in the previous quarter and $71.6 million or earnings of 29 cents a year ago.
Balance Sheet and Cash Flow
Cash and cash equivalents at the end of the fourth quarter was $301.3 million compared with $284.2 million at the end of the third quarter.
At the end of the quarter, accounts receivables were $477.8 million compared with $461.4 million in the previous quarter, a 3.6% increase on a sequential basis. Inventories were $230.4 million, up $15.4 million from the third quarter, an increase of 7.2% sequentially.
Guidance
For the first quarter of 2017, Fitbit expects revenues to remain in a range of $270 million to $290 million, lower that than the Zacks Consensus Estimate of $303.1 million. The company expects non-GAAP loss per share to be in a range of 18 cents to 20 cents. The Zacks Consensus Estimate is pegged at a loss of 36 cents. It expects non-GAAP tax rate to be approximately 50%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 10.8% due to these changes.
VGM Scores
At this time, Fitbit's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.
Image: Bigstock
Why Is Fitbit (FIT) Down 11.2% Since the Last Earnings Report?
It has been about a month since the last earnings report for Fitbit, Inc. . Shares have lost about 11.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 drivers.
Fitbit Q4 Loss Greater than Expected, Revenues Miss
Fitbit, Inc. reported fourth-quarter 2016 adjusted loss (excluding all one-time items but including stock-based compensation) of 63 cents per share, which was greater than the Zacks Consensus Estimate of a loss of 61 cents.
At the call, management highlighted some recovery initiatives that are expected to pull the company out from the slower growth. These steps include offering a streamlined set of products, improving software and services to offer more personalization to customers and achieving greater integration into the healthcare ecosystem.
Let’s check out the numbers.
Revenues
In the quarter, 6.5 million connected health and fitness devices were sold with products Charge 2, Flex 2, Blaze and Alta accounting for 96% of total revenue. The company started digital health partnerships with leading companies including Medtronic.
Geographically, revenues from the United States accounted for 67% of the fourth quarter revenues, EMEA brought in 23%, Americas excluding the U.S contributed 6% and the remaining 4% came from Asia-Pacific.
Margins and Net Income
Gross profit for the fourth-quarter was $127 million. Gross margin was 22.1%, down 1972 basis points (bps) sequentially and 2636 bps year over year.
Gross margin was negatively impacted by charges associated with increased inventory and weaker demand.
Pro-forma net loss was $140.8 million or loss per share of 63 cents as against $31 million or earnings per share of 13 cents in the previous quarter and $71.6 million or earnings of 29 cents a year ago.
Balance Sheet and Cash Flow
Cash and cash equivalents at the end of the fourth quarter was $301.3 million compared with $284.2 million at the end of the third quarter.
At the end of the quarter, accounts receivables were $477.8 million compared with $461.4 million in the previous quarter, a 3.6% increase on a sequential basis. Inventories were $230.4 million, up $15.4 million from the third quarter, an increase of 7.2% sequentially.
Guidance
For the first quarter of 2017, Fitbit expects revenues to remain in a range of $270 million to $290 million, lower that than the Zacks Consensus Estimate of $303.1 million. The company expects non-GAAP loss per share to be in a range of 18 cents to 20 cents. The Zacks Consensus Estimate is pegged at a loss of 36 cents. It expects non-GAAP tax rate to be approximately 50%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 10.8% due to these changes.
Fitbit, Inc. Price and Consensus
Fitbit, Inc. Price and Consensus | Fitbit, Inc. Quote
VGM Scores
At this time, Fitbit's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.