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By
Reuters
Published
Feb 28, 2018
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Fitbit slumps as new smartwatch fails to excite

By
Reuters
Published
Feb 28, 2018

Fitbit Inc’s shares fell 14 percent in early trading on Tuesday after the company said its newly launched smartwatch was not selling as expected, raising concerns about the company’s ability to become profitable again in the near term.



Photo: Reuters



The wearable device maker on Monday posted its fifth straight quarter of loss, gave a disappointing forecast for the first quarter, and acknowledged competitive pressures in the smartwatch market.

Fitbit, whose colorful fitness-tracking wrist bands became must-haves for fitness enthusiasts a few years ago, has struggled in recent quarters as Apple and Samsung step up their game in the wearable devices market and China’s Xiaomi woos users with cheaper products.

“Significant declines in devices sold year-over-year and significant quarterly losses do not inspire confidence in the company’s ability to quickly return to profitability,” Wedbush Securities analyst Alicia Reese said in a note.

Fitbit’s shares, which are trading 76 percent below their IPO price, have fallen 10 percent in the past 12 months. The short interest on Fitbit’s outstanding shares is 16 percent.

Analysts have said the stock price will continue to be under pressure in the near-term.

The company said on Monday that its Ionic smartwatch, launched in October and priced at $300, was not selling as expected because it was not a “mass-appeal” smartwatch.

Executives tried to reassure investors that the company was focused on selling more smartwatches that would attract a broader user base in 2018.

For comparison, Apple’s smartwatches range from $329-$1,399.

“We would become further negative on the stock if coming smartwatch launches do not sufficiently improve or differentiate the ecosystem,” Morgan Stanley analysts said.

Fitbit Chief Executive James Park also reiterated the company’s focus on healthcare services - using fitness data to connect users with doctors, hospitals and lifestyle coaches. This business is expected to give the company a more predictable stream of revenue.

Earlier this month, Fitbit acquired startup Twine Health to boost its healthcare services.

Analysts, however, remained skeptical about how quickly this business will ramp.

“The company has an excellent opportunity ahead with medical applications, but it is unlikely that subscription revenue will contribute meaningfully before 2019,” Wedbush’s Reese wrote.

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