Is it time to stick a fork in Fitbit Inc (NYSE:FIT) and FIT stock? If it’s not, it’s getting pretty close. And while Fitbit stock looks cheap today, trading at all-time lows, there’s still no sign that the San Francisco-based fitness tracker maker, which is losing money, can ever get its act together.
FIT stock closed Friday at $5.86. The shares have fallen roughly 20% year-to-date and almost 21% in the last 30 days.
Since I last discussed the company’s future, Fitbit stock has fallen almost 18%. Those of you who avoided FIT stock or sold on my recommendation — you’re welcome. But despite its 52-week low status, it’s still not time to bottom fish.
What’s Causing the Pain for Fitibit Stock?
Why has FIT stock been punished lately? Concerns about the competition from the likes of Apple Inc. (NASDAQ:AAPL), Samsung (OTCMKTS:SSNLF) and Fossil Group Inc (NASDAQ:FOSL) are not going away.
Analysts have taken note and are abandoning the company. Just in the past thirty days there have been almost a dozen estimate cuts, and no upward revisions. As it stands, the company is now expected to lose 50 cents per share in the current quarter, compared to forecasts for a 17-cent per share profit when the quarter began.
As for the fiscal year, estimates have been reduced from earnings of 58 cents per share, to a loss of 15 cents. But wait, there’s more. Based on the fiscal 2018 estimate, Fitbit’s loss is expected to widen to 32 cents. This compares to a prior estimates for a 65-cent profit just thirty days ago. If those gloomy forecasts weren’t bad enough, consider Fitbit must now convince the Justice Department that it didn’t steal trade secrets from rival Jawbone.
According to Bloomberg:
“The Justice Department and and Department of Homeland Security have been conducting a grand jury probe of Fitbit for more than five months, according to Jawbone’s Feb. 1 filing in San Francisco state court. Jawbone alleged in its May 2015 complaint that Fitbit hired five Jawbone employees who brought with them more than 350,000 confidential Jawbone files. Jawbone claims the files included information about materials, sensors and detailed breakdowns of its costs and profit margins.”
FIT has denied these allegations, and while Jawbone’s claims, suggesting that the company is trying to put it out of business, may be somewhat embellishing the truth, the cost of the legal battle can still weigh on Fitbit’s bottom line. This invites more risk regarding the company’s earnings potential. Although selling off losers like FIT stock can be difficult, this is one where investors, who have witnessed some 80% declines since Fitbit’s IPO in 2015, must hold their noses and swallow.
Bottom Line for FIT Stock
I still don’t think Fitbit stock is heading to zero, given that the company still has a sizable portion of the fitness tracker market and commands a great degree of respect with retailers. But it’s also possible that FIT’s market has become saturated. You can’t overlook the fact that anyone who might have wanted a Fitbit now already has one. As such, the company must show the market what’s next. And until it can do that, FIT stock won’t go anywhere but down.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
