Fitbit's Shares drops: Is it time to give up on Fitbit?

Asseh Rebecca
Mar 6, 2018

California based company, Fitbit is facing a sticky wicket as the wearable maker posted a disappointing nosedive of its Shares (NYSE: FIT). Fitbit is experiencing its fifth straight quarter of year-over-year revenue decline with Its shares hitting an all-time low after Its revenue fell 0.5% annually to $570.8 million, missing estimates by $18.1 million. In February, the company’s stock, which had debuted at $20 a share in 2015 got as low as $4.67 in morning trading and closed at $4.86, down 12% on the day.

Fitbit's revenues from the US rose 40% annually, its revenues from EMEA (Europe, Middle East, and Africa) moved up by 16%, and its APAC (Asia Pacific) revenues climbed 56%. This healthy growth in its overseas market generated 42% of its revenues during the quarter. The 0.5% revenue decline for the quarter was actually a remarkable improvement from the double-digit declines the company posted in the previous four quarters.


Fitbit is facing stiff competition from Apple and Huawei in the overseas market and with Apple's launch of the Apple Watch 3, which is a stiff competition against Fitbit's Ionic; and Huawei, which sells most of its fitness trackers in China and is slowly expanding into the US market with cheap devices like the Band 2. Fitbit is also getting rivalry from Huami, which has Xiaomi taking responsibility for all its manufacturing and marketing expenses. Huami and Fitbit got a tie as the largest wearables maker during that quarter, with Huami producing cheaper wearables with similar features Fitbit stands no chance.

With all the competition the company is facing, its total shipments dropped by 17% annually to 5.4 million during the quarter. As expected, this has put Fitbit's gross margin under pressure. Its non-GAAP gross margin of 44.2% represented a big improvement from 22.4% a year earlier, but it still marked a sequential dip from 45.2% in the third quarter. However, Fitbit is predicting a 15%-20% revenue drop to between $240 million and $255 million while analysts are reaching a consensus of $340 million.

While analysts believe that the company will show $1.73 billion in revenue for the full year 2018, the company is anticipating $1.5 billion. Considering how bad the last quarter was for the company, and its sinking stock price, the company may continue to struggle and may be an attractive option for a takeover.

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