Things can't seem to get much worse for Fitbit (NYSE:FIT) as we head into Wednesday afternoon's quarterly report. The stock has plummeted 89% since peaking two summers ago, hitting a new all-time low earlier this month after announcing problematic preliminary financial results.

The holiday quarter was brutal, and while the results will be made official after the market close on Wednesday, we already know that sales for the quarter declined 18% to 20% since the prior year's showing. Fitbit was already experiencing a sharp deceleration of top-line growth heading into the final three months of last year, but this will be the company's first year-over-year drop in sales as a public company.

Unfortunately for Fitbit investors, this only appears to be the beginning of the rough patch. Fitbit also initiated guidance for 2017 alongside the gloomy preliminary financials announcement, and it sees sales plummeting 22% to 31% this year.

The silver lining in all of this is that there shouldn't be any more material bombshells in Wednesday's report. The market's already discounted the horrendous quarter and the gloomy near-term outlook. Investors will still be nervous, and rightfully so given how badly Fitbit stock has burned investors in less than two years as a public company.

A fitness workout involving a bench.

Image source: Fitbit.  

Black and blue Friday

Wednesday's report will be the first of at least a couple quarters of declining revenue, and the bottom line will likely take an even bigger hit. Margins have been contracting in this suddenly crowded market where smartphones and smartwatches are freelancing as activity monitors. Fitbit will post a loss of $0.51 to $0.56 a share. This will be Fitbit's first quarterly deficit in more than three years, but it won't be the last as the company is targeting a modest loss for all of 2017. 

Fitbit sold 6.5 million devices during the holiday quarter, down sharply form the 8.2 million connected health and fitness devices it moved during fourth quarter of 2015. However, there aren't too many companies selling millions of activity-tracking devices in any given quarter.

Selling millions of devices and building on its base of 23.2 million active users would normally command the market's attention, but Wall Street's worried about the deteriorating state in the wearables market. It's hard to take the market top dog in a fading niche seriously, especially when it's about to rattle off what appears to be a series of quarterly deficits with declining revenue growth.

There's still hope for Fitbit. It can continue to make inroads in the corporate wellness market where its brand is still in favor. Fitbit can introduce bar-raising new products. Let's also not forget the buyout speculation that will percolate as long as Fitbit is a category leader. We may already know how bad the fourth quarter was for Fitbit ahead of Wednesday's report, but now it will have to sell the market on its turnaround plan.