Fitbit Inc. (FIT) stock is down 29.43% in premarket trading, falling from $12.81 to $9.04 per share in a matter of ten minutes. The fitness company’s value dropped by over $1 billion during the downturn.
The company is the most successful in the high-tech wearables industry.
The company’s stock fell for a few reasons:
1. CEO James Park Reported Q3 2016 Earnings
Park, the company’s long-standing CEO, released the company’s earnings report, which met analyst expectations. The company’s revenue jumped 23% on the quarter, with revenue reaching $504 million.
Adjusted earnings per share reach $0.19.
The company’s earnings were impressive, and its Flex 2 and Charge 2 fitness trackers have sold well since their launch.
The earnings weren’t the problem for the wearables company.
2. Q4 2016 Guidance Weighed on the Company’s Stock
Investors point to one major concern with the company’s release: Q4 guidance. The last quarter of the year ushers in the holiday season where retail sales skyrocket. The company’s guidance for the quarter is an abysmal growth of 2% to 5% in sales compared to the same quarter in 2015.
In comparison, the company’s sales grew 92% from Q4 2015 to Q4 2015.
The low sales growth expectancy is the main reason for the company’s poor performance aftermarket.
3. Asian Sales Dropped 45% in Q3
The company’s growth in the Asia Pacific is weighing on the company’s results. Sales fell 45% on the quarter in the region. Park also stated that the Flex 2 band manufacturing hasn’t been able to keep up with demand.
The company expects to lose $50 million in Q4 sales due to demand far surpassing supply.
Fitbit is a dominant company in the fitness wearables industry, but the company has low profit margins which need to be corrected. The company has strong repeat customer sales, but from an investment standpoint, the company’s stock has fallen over 50% since it’s June, 2015 IPO of $20.
