Can Fitbit Recover after a Disappointing 2016?



FIT fell 5.1% on December 28

Fitbit (FIT) fell 5.1% on December 28, 2016, to close at $7.43. A day earlier, FIT rose 7.4% after it was reported that the ranking of its free app, which is available on the App Store (AAPL), soared to the top on Christmas Day. How this uptick in app ranking could impact Fitbit’s revenues in 4Q16 remains to be seen.

In 4Q16, Fitbit expects revenues to be in the range of $725 million–$750 million, with a non-GAAP[1. generally accepted accounting principles] gross margin of ~46%. Analysts expect revenues of ~$2.3 billion in 2016 and $742.2 million in 4Q16. They expect YoY (year-over-year) sales growth of 4.3% in 4Q16, -1.2% in 1Q17, and 25.8% in fiscal 2016.

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Fitbit stock has fallen ~42% since the company announced its 3Q16 results on November 2, 2016, due to weak revenue guidance. Sales in the last quarter of the year account for ~40% of Fitbit’s annual revenues, and analysts were disappointed as the company expects modest YoY sales growth of 2%–5% in 4Q16.

Slowdown in the wearable market

Fitbit (FIT) has had a difficult year, as its stock fell 75.1% in the trailing 12-month period. Its stock also fell over 11% in the trailing one-month period. Although Fitbit still leads the wearable market, the overall market grew 3.1% YoY in 3Q16, when the company shipped 23 million units.

According to IDC, Fitbit is estimated to have shipped 5.3 million units with a share of 23% in the wearables device market in 3Q16.

Xiaomi came in second place for 3Q16, with shipments of 3.8 million units and a market share of 16.5%. Apple fell to third place as shipments fell 71% YoY to 1.1 million units and a share of 4.9%.

Samsung (SSNLF) and Garmin (GRMN) are the other leading players in this segment, with shipments of 1 million units and 1.3 million units, respectively.

In 2Q16, total unit shipments rose 26.1% year-over-year from 17.8 million units to 22.5 million units. IDC, however, expects the worldwide wearables market to grow at a CAGR[2. compound annual growth rate] of 20.3% from 2016 to 2020. Total shipments are projected to rise from 79 million in 2015 to 101.9 million in 2016 and 213.6 million in 2020.


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