Unexpected Headwinds Didn't Keep Fitbit From A Solid Quarter

Fitbit Inc FIT reported strong 2Q results, significantly ahead of expectation, with continued unit sales growth, BofA Merrill Lynch’s Nat Schindler said in a report. He maintained a Buy rating on the company, while reducing the price objective from $29 to $24.

Despite unexpected headwinds, Fitbit reported its 2Q revenue at $587mn, beating the Streets’ $578mn, and EBITDA at $49mn, ahead of the expectations of $45mn. Unit sales growth accelerated to 28 percent y/y, from 24 percent in the previous quarter, despite tougher comps, analyst Nat Schindler mentioned.

Guidance Unchanged

Fitbit kept its guidance unchanged, which provided the company “more of a cushion for the all-important Q4,” Schindler noted. He raised the EPS estimates for 2016, 2017 and 2018 from $1.20 to $1.23, from $1.64 to $1.70 and from $1.92 to $1.98, respectively, reflecting better expense controls.

Related Link: Fitbit Is Trading At A Discount; SunTrust Maintains Buy

Investor Sentiment Overly Negative

Despite Fitbit’s strong results, investor sentiment continues to be negative, the analyst pointed out. He added, “Although we agree it is difficult to forecast demand for fitness bands next year, we expect Fitbit’s accelerating growth and high profitability to eventually wear down the overly bearish investor sentiment.” The price objective has been lowered to reflect more conservative multiples for 2017.

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