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Fitbit Earnings Redux And Possible Future Developments

May 05, 2018 3:47 PM ETFitbit, Inc. (FIT)43 Comments
Jeffrey Himelson profile picture
Jeffrey Himelson


  • Fitbit reported earnings yesterday and beat estimates on both the top and bottom lines.
  • Nonetheless, with tracker revenue declining, leading to an overall y/y revenue drop, Wall Street has shied away from FIT.
  • Due to this most recent sell-off, FIT has returned to trading at about its asset levels and I believe it is an opportune time to continue to accumulate shares.

Yesterday, Fitbit (NYSE:FIT) reported earnings, after the bell, and beat on both the top and bottom lines, but is nonetheless trading lower today. FIT reported revenue of $248 million, beating estimates by $0.65 million and Q1 EPS of -$0.17, beating estimates by $0.02 per share. Despite beating estimates, FIT has traded down today and is currently sitting just below $5.00 per share. I welcome this sell-off, as it affords me more time to add to my position at this undervalued level.


FIT data by YCharts

I believe the main reason for this sell-off has been the falling revenue, as demand for trackers has been turning more tepid. This weakened demand for their trackers led to revenue declining 17% y/y, which has spooked many investors. Additionally, Q2 guidance has worried many. Management guided that they expect revenue to decline for revenue to drop 19% (between $275 million-$295 million). Moreover, they guided that free cash flow will drop around $85 million. However, on a positive note, management reiterated its FY guidance of $1.5 billion and for free cash flow to be break-even for 2018.

Another huge positive announcement was that smartwatch revenue nearly doubled on a q/q basis and now represents 30% of revenue. FIT also announced that Versa pre-orders were very strong "and the best-sell through sales in North America of any device in the company's history in the first week of availability." The reviews for the Versa have been phenomenal and I was sent one from Fitbit to try and personally love it.

I purchased the Fitbit Ionic watch and really enjoyed its fitness features, but to be honest, did not think it was very aesthetically pleasing and didn't believe it was a great watch to wear to work, professionally speaking. However, FIT has definitely created an aesthetically pleasing watch with the Versa and I

FIT Market Cap data by YCharts

This article was originally published yesterday on my exclusive marketplace service, Invest with a Stacked Deck.

This article was written by

Jeffrey Himelson profile picture
Jeffrey Himelson is a corporate lawyer practicing in NYC. He previously worked as a research analyst at a hedge fund and graduated from Columbia Law School in 2017. He is best known on Seeking Alpha for his article "The Trade That Netted Me More Than a 2000% Return."Mr. Himelson is also the author of a book series to teach kids about business: Kimmy and Jimmy's Business Adventures.

Analyst’s Disclosure: I am/we are long FIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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