Will Increasing Competition Hurt Fitbit's Q1 Earnings?

Fitbit Inc. FIT is set to report first-quarter 2018 results on May 2. Notably, Fitbit's results surpassed the Zacks Consensus Estimate in three out of the trailing four quarters. It has an average four-quarter positive surprise of 43.3%.

The company's growth has been hampered by increasing competition in the fitness wearable category, lack of upgrades among existing users and lackluster growth in the Asia Pacific region.

Let's see how things are shaping up for this announcement.

Increasing Competition From Other Players

Fitbit, which became a prominent name for its simple fitness wearables, has been hurt by massive competition in the market. It faces competition in both the high and low-end product range. On the high-end front, it competes with Apple Watch. Although Fitbit expected Ionic to help the company take on Apple, it is hardly an easy task to compete with one of the biggest companies in the world. Also, many big manufacturers are developing connected devices on Google's Android operating system.

On the lower end, fitness-tracking devices from Jawbone, Garmin Ltd. GRMN and Xiaomi also pose tough competition. Even the launch of its flasgship Ionic and addition of innovative features have not helped it stay ahead of its competitors.

Fitbit's Initiatives to Drive growth

The company has been introducing new products to increase its revenue base. Yet,these products are unable to drive enough revenues for the company. However, its efforts to further diversify business, and focus on health and wellness could help the company drive revenues in the first quarter.

Also, Fitbit is taking other initiatives that are expected to pull out the company from slow growth. These steps include offering a streamlined set of products, improving software and services to offer more personalization to customers, and achieving greater integration into the healthcare ecosystem. In this regard, the company recently announced its plans to acquire Twine Health, a health coaching platform. This will further expand its share in the healthcare business, thereby increasing its subscription-based revenues.

For the first quarter of 2018, Fitbit expects revenues to remain in the range of $240-$255 million. The Zacks Consensus Estimate is pegged at $246.1 million.

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