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Fitbit: Bullish But Not Buying Yet

May 07, 2018 2:45 PM ETFitbit, Inc. (FIT)25 Comments
George Kesarios profile picture
George Kesarios


  • Fitbit's management had provided dismal guidance for Q1, as such there was not much to expect.
  • The worse part of Q1 results was the guidance, which calls for continued losses for the rest of the calendar year.
  • While there are several things to be bullish about, they are not enough to make a buyer of Fitbit shares yet.

Fitbit's (NYSE:FIT) Q1'18 results were in line with guidance provided the previous quarter. And, because guidance was already very dismal, there was not much to expect for Q1.

FIT had provided revenue guidance in the range between $240 million and $255 million, and the quarter came in at $248 million. The company's non-GAAP EPS guidance was a loss in the range of $0.21 to $0.18, and the actual number came in at a loss of $0.17. The results were better than the consensus by $0.02 EPS, and revenue by $0.65 million (yawn).

Q2 guidance was not any better. The company is expecting revenue to decline 19% Y/Y, in the range of $275 million to $295 million, with a non-GAAP loss in the range of $0.27 to $0.23 per share.

Finally, full-year guidance calls for lower margins, breakeven free cash flow (at best), stock-based compensation expense of approximately $110 million, and revenue of about $1.5B vs. $1.6B last year. So, is there any reason to be a buyer of FIT in 2018? Probably not.

Fitbit's problem

Something that I have come to realize lately is that FIT has a core-product disadvantage. By this, I mean it does not have a "bread and butter" product like the iPhone, which sells quarter after quarter.

The company literally has to reinvent itself every quarter and come up with a new line of products. This is because whatever it came up with several quarters ago is out of fashion or outdated.

And, the problem that arises is that it can never gain permanent revenue traction with any product. At least, this has been the case so far. However, with the introduction of the Ionic and Versa line of smartwatches, this might change in the future.

The company has repeatedly said it expects its device mix

This article was written by

George Kesarios profile picture
I only look at stocks that have the possibility to double over a twelve month period and stocks in which the risk/reward ratio payout is high. In addition I focus on swing trade opportunities. I focus more on valuations and risk/reward metrics as opposed to what make companies tick. I have been a professional investor for over 20 years and during the past several years an economics analyst and financial writer for capital.gr, the biggest economic news portal in Greece. I have managed money from time to time and have also done some seed venture capital projects in the past.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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