Fitbit (FIT) went public at $20 in June 2015, and enthusiastic bulls -- believing that wearables would conquer the world -- bid the stock up to nearly $50 a month later. Today the stock trades at just over $5 due to a disastrous streak of decelerating sales growth and declining margins.

But just how did things get so bad for Fitbit, which is practically synonymous with fitness trackers in general? Let's take a look back at six of its biggest blunders to find out.

The Fitbit Charge 2.

The Fitbit Charge 2. Image source: Fitbit.

1. Market share losses

Fitbit was once the largest wearables maker in the world. But between the third quarters of 2016 and 2017, its global market share dropped from 21.9% to 13.7%, according to IDC. Xiaomi, Apple (AAPL 1.66%), Huawei, and Garmin (GRMN 0.66%) respectively claimed 13.7%, 10.3%, 6%, and 4.9% of the market during that quarter.

On a year-over-year basis, Xiaomi, Fitbit, and Garmin lost market share, while Apple and Huawei posted big gains. Meanwhile, "other" brands accounted for 51.4% of the market during the quarter, up from 47.7% a year earlier. This all indicates that the market is getting saturated on multiple fronts, and Fitbit is struggling to stand out.

2. Quality control issues

Fitbit's brand was also tarnished by various quality control issues over the past few years. In 2014, it recalled the Fitbit Force due to skin irritation and rashes. The following year, some Charge and Surge users complained about similar problems.

In 2016 Fitbit was sued over alleged accuracy issues regarding its PurePulse heart tracking technology. Last year, a Fitbit user sued the company after a Flex 2 exploded, but the company maintains that the accident was caused by "external forces".

The development of its Ionic smartwatch, which was launched last year, was also reportedly plagued with production delays, waterproofing and GPS problems, and the resignations of several key team members.

3. Uninspiring smartwatch ambitions

Fitbit's future depends heavily on the Ionic gaining ground against the Apple Watch 3 and other higher-end smartwatches. But its reception has been lukewarm at best -- Engadget called it a "passable smartwatch", while Tech Radar said it was "a good try, but not quite iconic."

The Ionic has certain advantages against the Apple Watch 3, like a longer battery life of four days and a lower price tag of $300. But some of the software features seem incomplete or poorly conceived.

The Fitbit Ionic.

The Fitbit Ionic. Image source: Fitbit.

For example, the Ionic has apps, but it lacks a full-fledged app store to counter Apple's watchOS apps, Garmin's ConnectIQ apps, and Alphabet's (GOOG 0.72%) (GOOGL 0.83%) Android Wear apps. Meanwhile, its new Fitbit Pay feature will likely struggle against early movers like Apple Pay and Android Pay.

4. Runaway operating expenses

As Fitbit's revenue growth decelerated and its pricing power waned, it ramped up its marketing and R&D expenses. That move caused its operating margin to drop through the floor.

FIT Operating Margin (TTM) Chart

Source: YCharts

As a result, Wall Street expects Fitbit's revenue to fall 25% this year, and for its bottom line to remain in the red.

5. Failure to diversify into software subscriptions

When hardware companies face slowing sales growth and declining margins, they often explore the idea of upselling higher-margin software subscriptions to milk more revenues from existing users. Fitbit previously established that foundation with FitStar, its premium training app, but it never turned it into a meaningful source of revenue.

Last October, Fitbit finally rebranded FitStar as "Fitbit Coach", a $40 per year service which offers personalized training sessions, adaptive video workouts, and Fitbit radio. Fitbit stated that the app's paying customers grew 75% annually last quarter (without disclosing exact user numbers), but admitted that its revenue remained "immaterial" to its financial results.

If Fitbit focused on expanding that ecosystem during its heyday, it might now have a better way of locking in its users and generating higher-margin revenues.

6. Forgetting about its "corporate wellness" plans

Fitbit once touted its growth potential in the enterprise market with "corporate wellness" plans, in which companies placed bulk orders of its fitness trackers for their employees with the goal of cutting healthcare costs.

Fitbit once claimed that these programs -- which serve 1,300 enterprise customers, including 70 Fortune 500 companies -- generated about 10% of its revenues. Yet these partnerships aren't really boosting Fitbit's market share or device shipments, which fell 32% annually to 3.2 million last quarter, in a meaningful way.

It's unclear if Fitbit initially exaggerated the impact of these programs, or simply gave up on pursuing new deals. Either way, its corporate wellness push seems like an empty promise for now.

The road ahead...

Fitbit's stock might look cheap at 0.8 times sales, but it's no bargain. Its core Ionic, Charge 2, Alta, and Flex 2 devices all face tough competition on multiple fronts, and its margins should keep declining as it lowers prices and ramps up its spending. Therefore, investors should steer clear of this broken stock.