Fitbit Inc (NYSE:FIT) shares are tanking after the fitness device maker told investors its first quarter sales and earnings would miss analysts’ forecasts. Investors are now wondering if Fitbit, the once dominant tech stock that has seen its shares tumble 55 percent over the last 12 months, is simply a one-trick pony.
Fitbit Stock Sinks Following Disappointing Reports
Can Fitbit turn around the sinking ship or are critics right that it’s a one-trick pony?
Waistlines may have shrunk, but Fitbit investors’ wallets are also shrinking after the San Francisco-based activity-tracking device maker saw its shares collapse 15 percent in after-hours trading Monday. During Tuesday’s trading session, shares have fallen as much as 20 percent. This comes as executives warned shareholders that it expects smaller than expected profits.
Fitbit projects its first quarter sales to generate as little as $420 million, which is a lot lower than analysts’ forecasts of around $485 million. The firm noted that first-quarter adjusted earnings per share will be between zero and two cents, much lower than Wall Street’s 23 cents estimate.
The tech firm’s full-year 2016 sales of $2.5 billion and earnings guidance of $1.20 per share met expectations. Last year, Fitbit sold more than 21 million devices, a 150 percent increase from the previous year.
Despite these strong sales numbers, investors are worried about Fitbit’s growth. After the weak guidance, fewer than a dozen Wall Street analysts had cut their price targets for Fitbit.
Investors have also been open regarding Fitbit’s failure to match the competition from new market entrants. The Apple Watch recently entered the fitness tracking market and it is quickly catching up with nearly a fifth of the market.
Year-to-date, Fitbit shares have gone down 55 percent to around the $13 or $14 mark.
James Park, Fibit CEO, seemed to have a defeatist attitude in a statement: “This has been a pretty competitive category for a while. The story will play out, but in the short term we can’t control the share price.”
This may be surprising because Fitbit’s line of products, like Surge and Charge, are very popular. People like U.S. President Barack Obama, Texas Senator Ted Cruz and actor Ryan Reynolds have all been seen wearing Fitbits.
2015 IPOs Already Hate 2016
Last summer, Fitbit launched an initial public offering (IPO) that saw its market valuation reach $4.1 billion which propelled its stock to $20 a share. The following months, the Fitbit stock climbed to $50. Now, however, Fitbit is following in the footsteps of other firms that launched IPOs last year.
Shopify Inc (NYSE:SHOP), Natera Inc (NASDAQ:NTRA) and Square Inc (NYSE:SQ) are all firms that filed for IPOs last year, but have since sputtered throughout 2016. These three stocks have shed about one-quarter of their value year-to-date.
The common theme for a lot of these 2015 IPOs is the fact that they forecast immense growth with top-line revenue earnings. However, they made it clear they weren’t focusing on bottom line or profits. Since investors are frightened of today’s volatile market, they’re steering clear of these consumer-facing firms that riskier than steady stocks.
The likes of Johnson & Johnson (NYSE:JNJ) or Procter & Gamble Co (NYSE:PG) may not be as sexy as the likes of Netflix Inc (NASDAQ:NFLX) or Apple Inc (NASDAQ:AAPL). But at least they provide steady earnings and durable dividends.