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Fitbit Face-Plants After Giving Weak Q1 Guidance, User Numbers

Fitbit ( FIT ) stock fell off the treadmill Tuesday, a day after the maker of wearable fitness devices reported better-than-expected fourth-quarter results, but guided Wall Street much lower than expected for the current quarter. Fitbit shares were down 19%, near 13.40, in midday trading on the stock market today , and at least five investment banks downgraded their rating on the company. Fitbit stock hit its all-time low of 12.90 on Feb. 11, after the company went public in June at 20 a share and peaked in August near 52. Several analysts downgraded the stock or cut their price targets after the San Francisco-based company late Monday posted Q4 earnings and gave Q1 and full-year 2016 guidance. In Q4, Fitbit earned 35 cents a share, excluding items, on sales of $712 million. Non-GAAP earnings per share rose 67%, and sales jumped 92% on a year-over-year basis. Analysts polled by Thomson Reuters expected 25 cents ex items on sales of $648 million. But for the current quarter, Fitbit is targeting non-GAAP earnings per share of 1 cent on sales of $430 million, at the midpoint of its guidance range. Analysts were modeling 23 cents and $485 million. Fitbit’s New Products Out In March Fitbit Chief Financial Officer Bill Zerella said Q1 is a product transition quarter, with the launch of the Fitbit Blaze smart fitness watch and Alta fitness wristband in March, as well as the discontinuation of the Fitbit Charge. Fitbit expects to incur higher sales and marketing expenses because of the global product launches, plus additional manufacturing expenses to maximize production of the new products. Piper Jaffray analyst Erinn Murphy downgraded Fitbit stock to neutral from overweight and slashed her price target to 14 from 24. The outlook for Fitbit’s new products is cloudy, and the company faces tough year-over-year comparisons in the second half of the year, she said in a research report. Pacific Crest Securities analyst Brad Erickson downgraded Fitbit stock to sector weight from overweight. He cited the risk of hardware commoditization and poor user metrics as reasons for the change. “We see little likelihood of dispelling anytime soon the longer-term bear thesis of slowing growth, pricing pressure and longer-term commoditization,” he said in a report. Fitbit is looking like the next GoPro ( GPRO ), a hardware company facing market saturation, slowing growth and margin and earnings erosion, he said. Erickson is also concerned about active-user trends. Fitbit added 18 million new registered device users in 2015, of which 13 million, or 72%, were active users at year-end. Erickson says Fitbit stock has a fair value of 14. Cowen analyst John Kernan reiterated his market perform rating on Fitbit stock but axed his price target to 19 from 41. FBN Securities analyst Shebly Seyrafi maintained his outperform rating but cleaved his price target to 25 from 50. Sterne Agee CRT analyst Rob Cihra kept his neutral rating on Fitbit and price target of 18. To turn things around, Fitbit needs to show leverage in the corporate wellness market, improve customer retention, and come out with new products with breakthrough sensors. Despite shipping over 30 million devices in the past two years, Fitbit ended 2015 with 16.9 million active users. “This kind of ‘churn’ is likely just natural and systemic to the health/fitness market, as some Fitbits ending up in drawers seems comparable to well-intentioned health club memberships that don’t get used,” Cihra said in a report. Fitbit faces competition from makers of dedicated fitness products such as Garmin ( GRMN ) and Under Armour ( UA ), but also from makers of smartwatches with fitness features such as Apple ‘s ( AAPL ) Apple Watch.

Fitbit Q4 Earnings Report Could Be Catalyst For Beleaguered Stock

Fitbit ‘s ( FIT ) fourth-quarter earnings report on Monday could be an opportunity for the maker of wearable fitness devices to get investors interested in its story again. Piper Jaffray analyst Erinn Murphy said Fitbit’s Q4 report is “likely a catalyst” for its shares. She reiterated her overweight rating on the stock but slashed her price target to 24 from 60 on reset expectations for the San Francisco-based company. Fitbit went public on June 18 at 20 and climbed as high as 51.90 on Aug. 5. The stock cratered after a disappointing showing at the CES consumer electronics trade show in Las Vegas in early January. On Friday, Fitbit stock fell 2.5% to 15.60 after rival Garmin ( GRMN ) announced two new fitness wearables that will ship in the second quarter. Garmin introduced the Vivofit 3 daily activity tracker and Vivoactive HR smartwatch. The Vivofit 3 starts at $99.99 and features one-year battery life and automatic activity detection. The Vivoactive HR is a GPS smartwatch with wrist-based heart-rate tracking and costs $249.99. “While Fitbit has clearly been a very challenged stock year-to-date, we remain overweight on the stock into the Q4 print,” Murphy said in a report. “As we are now past the share lockup period, investors should begin looking at fundamentals again.” Analysts polled by Thomson Reuters expect Fitbit to earn 25 cents a share excluding items on sales of $648 million in the December quarter. Sales in the year-earlier period were $370 million. For the March quarter, Wall Street is modeling for Fitbit to earn 23 cents a share on sales of $485 million. In Q1 2015, Fitbit reported sales of $337 million. “We view fiscal 2016 favorably, given already announced new product launches (with more to come), the opportunity on the corporate wellness side, and an attractive multiple entry point into shares,” Murphy said. Fitbit’s newest products, the Blaze smart fitness watch and Alta fitness wristband, are set to go on sale in March. Fitbit faces a host of competitors in addition to Garmin. They include Apple ( AAPL ), Fossil ( FOSL ), Microsoft ( MSFT ) and Under Armour ( UA ). On Wednesday, Pacific Crest Securities analyst Brad Erickson reiterated his overweight rating on Fitbit but cut his price target to 31 from 47. “Demand appears steady after the holiday, but days of inventory are higher,” Erickson said. “Our upside bias to numbers remains and valuation is compelling, but we are tempering our expectations for multiple expansion, given inevitably slowing growth in 2016, even as corporate wellness remains a free call option in the name.” RELATED: Fitbit 2016 Outlook An Exercise In Worry For Investors? Fitbit Gets Fashionable With Alta Fitness Wristband .

Garmin Races Up 17% On Strong Q4, Driven By Fitness, Outdoor

Outdoor, fitness and navigation technology company Garmin ( GRMN ) surprised Wall Street on Wednesday with better-than-expected fourth quarter results, sending its shares almost 17% higher. The Olathe, Kans.-based firm earned 74 cents a share on sales of $781 million for the quarter ended Dec. 26. Analysts polled by Thomson Reuters expected Garmin to earn 48 cents a share on sales of $760 million. On a year-over-year basis, EPS and sales were down 4% and 3%, respectively, as Garmin’s once-core automotive GPS navigation device business continues its secular decline. The company’s auto segment sales fell 21% year over year to $268 million in Q4. Garmin’s top-performing segment was fitness devices, with sales rising 14% to nearly $229 million. Garmin’s outdoor segment sales rose 6% to almost $124 million. Aviation segment sales jumped 12% to $104 million. Marine segment sales climbed 8% to $56 million. Garmin stock rose 16.6% to 41.06 on the stock market today after the company announced Q4 earnings. On a conference call with analysts, Garmin CEO Cliff Pemble said the company’s investments to diversify from personal navigation devices are paying off. Excluding the auto segment, sales grew 11% year over year. The aviation, fitness, marine and outdoor segments together contributed 66% of revenue in Q4. In the fitness device market, Garmin dominates the high-end running and sports watches segment. But it has been competing more with Fitbit ( FIT ) and others in the activity tracker business. William Blair analyst Jonathan Ho reiterated his outperform rating on Garmin stock. Garmin’s 2016 guidance was a “source of relief” for investors, Ho said. Its full-year sales target of $2.82 billion was slightly above Wall Street’s consensus. But its EPS goal of $2.25 was 5 cents below consensus. Garmin also announced plans to maintain its current quarterly dividend of 51 cents a share over the next four quarters. “These results were better than investors feared, given the global macroeconomic challenges, competition, pricing pressure and currency headwinds that the company faced,” Ho said. “We were impressed by a solidly executed quarter that led revenue and EPS to be meaningfully above expectations and a solid guide that takes into account a still-challenging environment.”