What happened

Fitbit (NYSE:FIT) stock underperformed the market last month as shares lost 17%, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts

The decline led to a 22% loss for the wearables leader's stock on the year, compared to a 19% gain for the S&P 500.

So what

December's slump followed bearish comments from a Wall Street analyst who sought to temper the building optimism that Fitbit could post a dramatic operating rebound in the quarters to come. That's not likely, the analyst said, since the modest goal of achieving profitability would require that the wearables device maker expand sales at a healthy clip while managing gross profit margin of around 45% of sales.

A jogger interacts with her smartwatch.

Image source: Getty Images.

Fitbit's most recent quarterly report suggests these numbers will be difficult to reach. Sales in the third quarter slumped by 22% even as gross profit margin dropped from 47.8% of sales to 44.5%.

Now what

Fitbit's holiday quarter forecast calls for sales to inch higher with help from its Ionic smartwatch release. The management team also suggested that they might generate a slight profit during this critical retailing period.

Those results would mark significant progress for a company that, at one point in 2017, was enduring a 40% year-over-year revenue decline. Climbing back to modest sales and profit growth is just the first step in Fitbit's risky recovery plan, though.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.