It has been about a month since the last earnings report for Fitbit (FIT - Free Report) . Shares have added about 11.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fitbit due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Fitbit Q2 Loss Narrower Than Estimated, Revenues Beat
Fitbit, Inc. reported second-quarter 2018 adjusted loss of 22 cents per share, narrower than the Zacks Consensus Estimate of 24 cents.
The top-line figure also surpassed the Zacks Consensus Estimate by 13 million.
In the quarter, Fitbit sold 2.7 million devices, up sequentially. New products launched over the past 12 months, namely Fitbit Ionic, Fitbit Versa, Fitbit Ace and Fitbit Aria 2, as well as accessory Fitbit Flyer, contributed 59% to revenues.
The average selling price (ASP) increased 6% from the prior-year quarter to $106 per device in the second quarter.
Management expects the newly launched products to pick up demand. The company plans to ramp up manufacturing capacity to meet expected higher demand for its smartwatches.
Let’s check out the numbers in detail.
Fitbit reported revenues of $299.3 million, down 15.3% year over year but up 20.8% on a sequential basis. The top line was above management’s guided range of $275-$295 and also surpassed the consensus mark of $286 million.
The strong sale of its smartwatch wearables aided growth in the quarter. Also, strength in almost all regions, except Americas and the United States, led to sequential increase in revenues.
Geographically, revenues from the United States accounted for 61% of second-quarter revenues, EMEA brought in 22%, Americas excluding the United States contributed 5% and the remaining 12% came from the Asia Pacific.
On a sequential basis, all the regions depicted an increase, except Americas and the United States. However, on a year-over-year basis, revenues from the Asia Pacific increased 67%, while the same from all other regions decreased.
Margins and Net Income
Non-GAAP gross profit in the second quarter was $122.6 million. Gross margin was 40.9%, down 210 basis points year over year.
Non-GAAP operating expenses were 193.7 million versus 190.6 million in the year-ago quarter.
Pro-forma net loss was $54.2 million or loss per share was 22 cents compared with net loss of $19.3 million or loss per share of 8 cents in the year-ago period.
Balance Sheet and Cash Flow
In the second quarter, cash and cash equivalents & Marketable securities were $580.5 million compared with $658.4 million in the first quarter.
Accounts receivables were $242 million compared with $214.4 million in the last reported quarter.
Cash flow from operations was ($67.4) million and free cash flow totaled ($83.3) million in the second quarter.
For the third quarter of 2018, Fitbit expects revenues in the range of $370-$390 million, representing a decline of approximately 3% year over year.
The company expects non-GAAP loss per share within (2) cents to 1 cent. The Zacks Consensus Estimate is pegged at a loss of 3 cents per share. It expects non-GAAP tax rate to be approximately 2%.
For full-year 2018, Fitbit reiterated its revenues of $1.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.93% due to these changes.
At this time, Fitbit has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 style scores.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Fitbit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.