What’s your frustration threshold? That’s one of the questions investors need to ask before making a play on Fitbit Inc (NYSE:FIT) and Fitbit stock. The other question? How much money can you afford to lose?
Shares of the San Francisco-based fitness tracker maker have been crushed over the last year, losing some 60% of their value after the company’s wearable device business grew at a much slower pace than its once-bloated stock price suggested it would.
FIT stock closed Friday at $7.13, up 1.13% after touching a new 52-week low earlier in the week. As it stands, if you’ve only bought and held Fitbit stock since its IPO in 2015 then you’re down about 77.8% on your investment.
Headwinds for Fitbit Stock
Concerns about the competition from the likes of Apple Inc. (NASDAQ:AAPL), Samsung (OTCMKTS:SSNLF) and Fossil Group Inc (NASDAQ:FOSL) have served as headwinds. To offset the pressure and growth market share, FIT has gone on an acquisition spree over the past year: picking off companies and technologies, it hopes will give its smartwatch product an edge.
These buys include companies such as Coin, Pebble and Vector. Reports suggest it also went — unsuccessfully — after rival Jawbone.
During that span, however, the only ones who have made money on Fitbit stock have been the short sellers — those who don’t believe the company has a future. Amid its acquisition spree, FIT stock has lost almost 60% returns just in the last three months. And despite Fitbit stock trading near all-time lows, the short sellers have become even more bold as evidenced by the recent rise in the stock’s short interest.
“Short sellers have added more than 20 million shares over the first two weeks of 2017, bringing the total amount of shares on loan to close to 50% of float,” according to a recent report by financial analytics company S3 Partners. For a stock to have 50% of its float in the hands of short sellers is pretty telling.
For some context, the short percentage in AAPL stock, is at lest than 1% of the float. For that matter, Twitter Inc (NYSE:TWTR) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) — two stocks that short sellers have gotten rich off of — have respective 7% and 11% of short float.
In other words, there is plenty of pressure on Fitbit and FIT stock to succeed. Are the short sellers smarter than the longs? That’s tough to dispute, if basing it solely on their brokerage statements. And with Fitbit stock already issuing downbeat guidance for the just-ended quarter, combined with reports of weak holiday sales, now’s not the time to bet on FIT stock. While I don’t foresee the FIT going to zero, the short sellers apparently see it going much lower than current levels.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.