Fitbit (NYSE:FIT) prides itself on getting its customers to lead more active lifestyles, but investors have to wonder when the stock itself will start getting into shape. Fitbit shares have surrendered nearly 90% of their value since peaking three summers ago. The stock is trading lower again in 2018.
Things may not get any easier for Fitbit next week. It reports fourth-quarter results after Monday's market close. Analysts see growth for the first time in more than a year, but there are a lot of things that can trip Fitbit up at this point. Let's look at some of the things that can burn investors following its latest financial results.
1. Revenue growth may be unimpressive
After four quarters of double-digit declines, revenue is expected to grow modestly in Monday's report. Fitbit's guidance in early November is calling for $570 million to $600 million in revenue for the seasonally potent holiday quarter, and analysts are perched at the higher end of the midpoint with a consensus estimate of $589.1 million. Fitbit generated $573.8 million on the top line for the fourth quarter of 2016.
The problem here is that Fitbit's revenue plummeted 19% during the final quarter of 2016. Even if Fitbit lands just ahead of the high end of its range, it's unlikely to get anywhere close to the $711.6 million it scored during the fourth quarter of 2015. We can't exactly call this a turnaround in the making just yet.
2. Fitbit's Ionic could be a dud
Fitbit isn't going to sell more devices than it did a year earlier. Late last year, it introduced Ionic, its first true smartwatch, and it's beefing up the average price per device. Ionic retails for $300, roughly three times higher than the average Fitbit activity tracker.
Here's the problem with that: How many Ionic smartwatches have you seen in the wild? This is a hard market to crack, and a lot of the quarter's success will depend on whether Ionic was a hot holiday gift item -- and it just doesn't seem to have been.
Three months ago, Fitbit was bragging that Ionic received a healthy average of 4.2 out of five stars in consumer ratings on the world's largest internet retail site. The score is down to 4 now, a figure that's still respectable but suggests that later adopters aren't as excited about the device as the first wave of buyers were.
3. Red ink may continue
Fitbit's guidance calls for the per-share bottom line to clock in between a $0.01 profit and a $0.03 deficit an adjusted basis. Breaking even would be a pretty big deal for Fitbit, as it would mark the first time in a year it didn't lose money on an adjusted basis.
There could be struggles getting its newer products noticed, and the margin pressures that come with new products and bankrolling connected health initiatives can't be ignored. Fitbit put out a tight range when it came to bottom-line production, but that only means it can easily fall on the wrong side of that range if any of its businesses backpedaled.
Fitbit has a lot to prove on Monday. It can't afford to blow its seasonally strongest quarter.