To paraphrase our 45th president, Fitbit Inc (NYSE:FIT) stock has been “a disaster” of late. Shares of the once-exciting and hip new wearable technology company are down more than 22% year to date and 67% in the last year, and FIT stock is now hovering near all-time lows at $5.
But with Fitbit set to report first-quarter earnings today, and expectations tempered, any glimmer of hope could spark a flurry of buying activity into such a beaten-down stock.
But even if that happens, my guess is a post-earnings boom in Fitbit stock won’t last for long.
Fitbit Needs Way More Than an Earnings Beat
First-quarter estimates are so low — Wall Street’s looking for a 19-cent loss on a 44% year-over-year sales decline — that even a decent beat would still mean substantial negative growth. Full-year expectations aren’t much better: Analysts anticipate a 35-cent loss and a 27% revenue decline, which would represent Fitbit’s first-ever full-year sales drop.
And there’s no guarantee Fitbit earnings will beat despite the low bar.
In Q4, analysts were looking for a 50-cent loss, and FIT surprised to the downside by bleeding 56 cents.
And even if Fitbit does top earnings estimates, that’s no guarantee that FIT stock will be rejuvenated. Back in 2016’s Q1, Fitbit beat estimates by 233%, yet shares plummeted in the days that followed.
If you’re looking for a glimmer of hope amid all this negativity, Fitbit’s losses are expected to narrow to just 17 cents per share in 2018, and sales are supposed to tick back up again, at just under 10%. But that’s a full year away, and that’s far from a sizable rebound. It’s doubtful that investors will suddenly pile into FIT stock in anticipation of slightly better growth numbers next year, even with shares near record lows.
There are simply too many better growth alternatives out there in this bull market.
Fitbit’s Woes Aren’t Just Numerical
From a product standpoint, Fitbit remains something of a one-trick pony. Initially, people loved the novelty of being able to wear a wristband that does everything from tell the time to measure their daily steps, calories burned, exercise time, heart rate and nightly sleep. It’s why FIT stock popped 52% in its June 2015 initial public offering.
But smartwatches from Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL) and others offer many of the same functionality.
Consumer and investors alike are looking for something different.
Fitbit’s new “smartwatch,” rumored for months — though details were leaked this week — should help matters. The watch looks like a slightly bigger and better version of the Fitbit Blaze, with a built-in GPS, music from Pandora Media Inc (NYSE:P) and Bluetooth headphones, among other features.
But production of the new smartwatch has hit a few snags, meaning it won’t hit shelves this spring like the company had hoped. And with another Apple Watch likely due out this fall, the delay in Fitbit’s product could put it head-to-head with a competitor it doesn’t want to butt heads with.
FIT Stock Has No Real Catalysts
Fitbit’s first-quarter earnings report is extremely likely to be filled with ugly numbers, meaning that until its new smartwatch launches, there’s not much to be excited about. A beat tonight could provide a temporary boost, but we’re talking about a tourniquet on a stock that has been bleeding out for almost two years.
FIT stock has been an epic failure for all of about six weeks of its publicly traded life. And it will take a lot more than whatever comes out tonight to change that.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
