Fitbit shares rocket 15% as analysts bet on smartwatch launch
Fitbit Inc. shares rallied about 15% Thursday, as analysts weighed in on the fitness-tracking device maker’s better-than-expected second-quarter earnings and news that its smartwatch will hit stores in time for a crucial selling period.
“With channel inventory now at manageable levels (8-12 weeks), we believe FIT is positioned to participate with industry growth (18% according to IDC in 1Q17),” Benchmark analyst Scott Searle wrote in a note. “Importantly, the company provided the initial timeline for its smartwatch introduction which is expected in time for the holiday selling season.”
Fitbit’s fortunes have waxed and waned since it went public in June of 2015, as demand for its devices has fluctuated. Experts say that’s because trackers have failed to cement a position in the eyes of the public as a must-have item, instead of an accessory that drifts in and out of fashion.
The stock is trading at just below $6, well below its IPO price of $20. The company posted its first quarterly loss in the fourth quarter after sluggish holiday sales, and has not returned to profitability since then.
reported a second-quarter loss of $58.2 million, or 25 cents a share, after net income of $6.3 million, or 3 cents a share, in the year-ago period. The adjusted loss was 8 cents a share, narrower than the 15 cents consensus of FactSet analysts.
Revenue fell to $353.3 million from $586.5 million in the year-ago period, also ahead of the FactSet consensus of $341.6 million.
For the third quarter, Fitbit is also expecting a loss, of about 5 cents to 2 cents a share on revenue of $380 million to $400 million. Analysts expect a loss of 5 cents a share on revenue of $393.1 million.
“Consumer demand in the second quarter was better than anticipated, enabling Fitbit to reduce channel inventory and generate better sales,” Co-founder and Chief Executive James Park said in a statement.
“Our smartwatch, which we believe will deliver the best health and fitness experience in the category, is on track for delivery ahead of the holiday season and will drive a strong second half of the year.”
Benchmark’s Searle is sticking with a buy rating on the stock, which he said is based on his expectation for a modest recovery of the core business, coupled with a valuation of 0.3 times enterprise value/sales, “a left for dead CE (consumer electronics) valuation.”
he company has the opportunity “to monetize the strong, loyal installed user base and brand via an early developing wearable ecosystem (including the optionality of digital health),” he wrote.
Searle has a $10 stock price target on Fitbit, equal to 86% above its current trading level of $5.83.
Stifel analysts took a more cautious tone, and said the biggest risk factor for Fitbit is executing the smartwatch launch.
“We view the success of the smartwatch launch as a lynchpin for Fitbit’s future growth prospects and potential for a return to profitability,” they wrote in a note.
Details on the device remain sparse and while the company is expecting it to be primarily a health and fitness product, added features include such things as GPS, water resistance to 50 meters, multiday battery life and an app gallery at launch
“With years of focus on health and fitness, Fitbit brings a unique point of view to this market but execution risk for the comprehensive offering remains and consumer appetite for the product in a crowded competitive landscape remains unproven,” they wrote.
Stifel has a hold rating on the stock with a $6.00 price target. The stock has fallen 20.4% in 2017, while the S&P 500
has gained 10.4%.
Published at Thu, 03 Aug 2017 15:59:05 +0000 from Google News