If there is one strategy that I know does not work, it’s attempting to call a bottom in a downward-trending stock. And it’s even more difficult trying to buy at a new all-time low when the stock has been spiraling out of control. That’s exactly what anyone considering buying Fitbit Inc (NYSE:FIT) — which hit a fresh low last week — is doing.
Fitbit has tried to dig itself out of its hole several times this year, but amid each rally attempt, the buyers eventually dissipated and the sellers pushed FIT stock further into their ominous downtrend. This trend has lasted for a year and a half.
The gamblers over the last six months who have tried to predict the bottom have continuously gotten burned, and there are no signs today that a bottom was officially formed on Wednesday.
The technical aspect of FIT stock isn’t the only problem here, though.
When Fitbit was launched, it was a leader in the wearable technology space. But now that market is flooded with competitors ranging from giants like Apple Inc. (NASDAQ:AAPL) to smaller knockoff brands, and FIT is unable to keep up.
This loss of market of share has hurt the company’s fundamentals as well. In early 2016, analysts were predicting that Fitbit would be profitable this year and see earnings of more than $2 a share in 2018. Those estimates have drastically declined, with analysts now believing that the company will still be losing money in 2021.
Bottom Line on FIT Stock
In the end, I do not see Fitbit going bankrupt any time in the near future. In fact, there are several technical indicators that suggest a short-term rally could be in the making.
However, I am never an advocate of buying into hype.
Fitbit needs to figure out how to pivot its business model, so at the moment, FIT fails our NexGen fundamental criteria test. Until it gets things in order, Fitbit stock will probably continue to hit new all-time lows.
As a result, I’m staying away from this falling knife.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.