Fitbit Stock Falls 13% following 2Q15 Earnings Release



2Q 2015 earnings overview

Fitbit (FIT) operates in the consumer electronics sector. The firm develops activity-tracking, wearable devices that measure data along several lines.

Fitbit reported its 2Q15 earnings on August 5, 2015. Looking at the chart below, we can see that investor reaction to this report was negative. Fitbit’s stock price fell 13% by the close of trading on the day of the earnings announcement.

Fitbit’s top line increased by 253%, but its bottom line increased by only 19%. Its gross and operating margins declined by 4.5 basis point and by 2.6 basis points, respectively, year-over-year.

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Market trends

Fitbit dominates the consumer wearable sector in terms of shipments. Fitbit has a market share of 34.2%, followed by Xiaomi with a 24.6% market share, though the latter only started shipping devices in 2014. Xiaomi is followed by Garmin (GRMN) with a 6.1% market share, Samsung with 5.3%, and Jawbone with a 4.4% market share.

Fitbit is clearly the market leader in the fitness-tracking device space, but there’s a thin line between tracking devices and smartwatches. The Microsoft Band is more like a smartwatch, but it has a built-in GPS while it also tracks health.

The PowerShares QQQ Trust, Series 1 (QQQ) has 7.21% exposure to Microsoft (MSFT).

According to Morgan Stanley (MS), the wearables market will grow at a compound annual rate of 50% between 2015 and 2020. Wearables will probably reach 530 million units by 2020 and begin cutting in on the smartphone market.


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