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Fitbit's Rough Holiday

Fitbit's Rough Holiday

Shares of Fitbit Inc (NYSE: FIT) plummeted Monday morning after the company confirmed earlier reports that it needs to slash its workforce amid a weaker-than-expected sales performance.

Fitbit's stock was trading on Friday near its all-time lows as investors remain skeptical that the momentum for the fitness tracking segment remains hot. Trip Chowdhry of Global Equities Research even characterized Fitbit as a piece of junk back in May of 2016. Since then, Fitbit's stock has lost more than half of its value.

What Happened On Monday?

Fitbit said it will slash around 110 jobs, which represents approximately 6 percent of its entire workforce.

In conjunction with the layoffs, Fitbit said in a regulatory filing that it now expects to lose between $0.51 and $0.56 per share in the fourth quarter on revenue of $572 million to $580 million. The company's prior guidance called for an earnings per share of positive $0.14 to $0.18 per share on revenue of $725 million to $750 million.

Fitbit also provided preliminary fiscal 2017 guidance and expects to lose between $0.22 and $0.44 per share on revenue of $1.5 billion to $1.7 billion. Wall Street analysts had already modeled the company to earn positive $0.64 per share in the year on revenue of $2.39 billion.

Management's Commentary

Fitbit's co-founder and CEO James Park said the following in its report:

    "Fourth quarter results are expected to be below our prior guidance range; however, we are confident this performance is not reflective of the value of our brand, market-leading platform, and company's long-term potential. While we have experienced softer-than-expected holiday demand for trackers in our most mature markets, especially during Black Friday, we have continued to grow rapidly in select markets like EMEA, where revenue grew 58 percent during the fourth quarter.
    "To address this reduction in growth and what we believe is a temporary slowdown and transition period, we are taking clear steps to reduce operating costs. Looking forward, we believe Fitbit is in a unique position to stimulate new areas of demand by leveraging the data we collect to deliver a more personalized experience while developing upgraded versions of existing products and launching additional products to expand into new categories.
    "As the overall wearable category leader, we exited the year with an engaged community of over 23.2 million active users, making us uniquely positioned to be the partner of choice for the healthcare ecosystem, which is a key component of our long-term strategy. We believe the evolving wearables market continues to present growth opportunities for us that we will capitalize on by investing in our core product offerings, while expanding into the smartwatch category to diversify revenue and capture share of the over $10 billion global smartwatch market.
    "We believe we are uniquely positioned to succeed in delivering what consumers are looking for in a smartwatch: stylish, well-designed devices that combine the right general purpose functionality with a focus on health and fitness. With the recent acquisition of assets from Pebble, Vector Watch and Coin, we are taking action to position the company for long-term success."

Image Credit: By MorePix - Own work, CC BY-SA 3.0, via Wikimedia Commons

Latest Ratings for FIT

Dec 2020Morgan StanleyDowngradesEqual-WeightUnderweight
Nov 2019DA DavidsonDowngradesBuyNeutral
Nov 2019CitigroupUpgradesSellNeutral

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