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Fitbit Inc (FIT) Q3 ‘Conservative’ as Buyout Rumors Flourish

Fitbit Inc (FIT)

Fitbit Inc is set to post third-quarter results after the close of trade on November 2. The firm recorded solid second-quarter numbers with both the top line and the bottom line exceeding Street expectations.

Fitbit (NYSE:FIT)

That outperformance is likely to continue in the just concluded quarter as well. Fitbit expects Q3 revenues in the range of $335–$365 million. Non-GAAP earnings should come in between 7 cents and 10 cents per share.

Fitbit Should Capitalize on Latest Fad for Wearable Tech

Wearable technology is among the hottest fads and Fitbit Inc  is at the heart of this rapid shift in consumer preference.  The firm is currently the leader in wearable technology. Although, many analysts believe Apple will take over once Apple Watch shipments start accelerating later this year.

The adoption of wearable devices has been nothing short of astonishing. Data from marketing firm Acquity Group showed that just 7% of U.S. consumers owned a wearable device last year. That figure is expected to jump four-fold to 28% by next year!

With the demand for wearable devices expanding at such a swift pace, Fitbit should be able to leverage its first-mover advantage to boost its earnings and sales.

Fitbit Inc is also witnessing strong growth in the enterprise space. Its B2B offering, Fitbit Wellness has landed more than 20 new customers in the past three months, including Barclays, GoDaddy.com and BMC Software.

“We’re thrilled to be working with Fitbit on this key part of our health and wellbeing strategy,” said Dominic Johnson, Global Head of Wellbeing at Barclays, said.

“Running activity challenges across our business units and between teams will be an important part of our strategy to encourage more activity and fun in the workplace.”

In the meantime shares in Fitbit were slammed on Friday by rumors that the firm was looking to sell itself. Any buyout could be expected to put a premium on share price, and the stock jumped by more than 7 percent on Friday. Microsoft Corporation was named as one of the most likely bidders.

Buyout rumors being unbacked rumors, however, most of Wall Street has earnings in focus and is looking away from speculative event driven trading.

Q3 Consensus Estimates are ‘Conservative’

Cowen & Co.’s John Kernan reckons that Q3 consensus estimates are conservative, given that they suggest a meaningful slowdown in y-o-y sales growth.

Fitbit Inc ’s Google Search Trends continue to show over 100 percent y-o-y growth. Those trends are almost identical from the prior quarter. This implies “Fitbit searches are growing at a higher rate as trend data is being benchmarked against total Google searches,” Kernan added.

The Cowen Consumer Tracker Survey also indicates that the use of the Fitbit products and apps continued at sector-leading levels.

Kernan further states, “FIT’s new and highly visible marketing campaign includes TV commercials during televised sporting events, including the NBA Finals in June and numerous NFL games thus far this season.”

However, one issue that may cause some investor worry is the recent presentation by a security company that showed Fitbit’s Bluetooth interface was prone to hacking. The revelation sparked concern that a Fitbit device could ultimately give a free rein to hackers to tap into a synced phone or computer.

Shares of Fitbit Inc closed Friday at $40.49. The stock has soared 27 percent over the past six months, from a low of $29.70 on June 18.

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