Fitbit Downgraded By Wedbush On Demand Issues

Wedbush’s Nick McKay expressed concern regarding the current lower-than-expected demand for Fitbit Inc FIT products, as well as limited visibility into the company’s long-term financial targets and product roadmap.

Q3 Results

McKay downgraded the rating on the company from Outperform to Neutral, while lowering the price target from $18 to $10.

“Our prior expectation for significant top- and bottom-line growth in 2017 appears to have been overly optimistic, and we think it is more prudent to take a wait-and-see approach to initial FY:17 guidance and long-term demand trends,” the analyst stated.

Fitbit reported its Q3 results mostly in line with the guidance, with revenue benefiting from the Charge 2 production ramp.

However, the revenue of $504 million for the quarter was below the estimate and the consensus.

Guidance Cut, Shares Slide

\“More significantly, however, Fitbit cut its full year guidance dramatically, citing multiple factors including softness in demand that has continued into October,” McKay reported.

Fitbit cut its revenue guidance for FY 2016 from $2.50 billion–$2.60 billion to $2.32 billion–$2.34 billion, while lowering the non-GAAP EPS guidance from $1.12–$1.24 to $0.55–$0.59.

Fitbit shares plunged almost 30 percent mid-day on November 3, with little or no bounce back after the stock hit $9 per share.

Business Insider quoted CEO James Park as saying, “We continue to grow and are profitable, however not at the pace previously expected.”

McKay pointed out demand for Fitbit’s broader portfolio of products seems to have been disrupted, following the launch of Charge 2 and Flex 2 at the end of Q3:16.

At last check, Fitbit was up 2.94 percent at $8.74.