Fitness band RIP?
Fitbit fit to be tied
(TNS): FITBIT (FITB), the master of the activity tracker, is having trouble making its step count and investors are cooling off on the whole idea.
Shares of the consumer electronics company dropped by 30 per cent last Thursday. It’s just the latest blow for the company trying to maintain leadership in a market for overall wearable technology that’s in rapid decline and stuffed full of competition.
Shares of Fitbit are taking their latest leg down after the company late last Wednesday reported third-quarter revenue that missed expectations and the company cut its guidance for the fourth quarter, the company’s most crucial of the year (think holiday gifts and New Year’s resolutions). Analysts on average have slashed their revenue forecast on the company by nearly 25 per cent to $743.04 million for the quarter, says S&P Global.
The stock’s implosion reflects growing scepticism that activity bands and smartwatches will be a growing category going forward, says Ross Sandler, analyst at Deutsche Bank in a note to clients. “Shares assume (Fitbit) is a hardware fad that will see negative growth into perpetuity,” he says.
Fitbit is just the latest gadget maker that’s seen its shares and outlook get crushed as consumers’ drawers are already stuffed with electronic devices, especially smartwatches. Sales of wearable devices, which include smartwatches and activity trackers, in the third quarter fell to half that of year-ago levels, says International Data Corporation. Headphones and activity trackers have seen additional high-profile exits and retrenchments. Microsoft, which is working on beyond-thecurve technologies like artificial intelligence and 3-D modelling, has stated it has no immediate plans to release an update to its Band sports tracker. Sales of Apple’s smartwatch have barely moved the needle, compared with massive sales of its smartphone. That’s not to say the space is entirely dead. Garmin has been the notable bright spot in the industry as it continues to use engineering expertise to keep a step ahead, even as its business for navigation devices for cars is under assault by smartphone apps. The company has focused on navigation devices for marine uses and has continued to innovate with wearables designed for serious athletes. Shares of Garmin are up 28 per cent this year. Fitbit’s revenue is growing, too, just not as rapidly as investors thought it would before. Fitbit’s revenue this year is expected to hit $2.3 billion, up 26 per cent from 2015 levels, S&P Global says. Next year, analysts think Fitbit’s revenue will jump 14 per cent to $2.7 billion and profit to rise nine per cent to $218 million. Investors might think fitness trackers are a fad and growth will disappear, but that “isn’t happening now and we don’t see playing out in 2017,” Sandler says.