What happened

Shares of Fitbit (NYSE:FIT) have plunged today, down by 13% as of 11:45 a.m. EST, after the company reported fourth-quarter earnings last night. The company's all-important first smartwatch, the Ionic, did not sell particularly well.

So what

Revenue in the fourth quarter declined modestly to $570.8 million, which translated into a non-GAAP net loss per share of $4.7 million, or $0.02 per share. Both top- and bottom-line results fell short of the market's expectations of $588 million in sales and breakeven, respectively.

Three Fitbit Ionics on gravel

Image source: Fitbit.

The market for fitness trackers ain't what it used to be, as wearables market share is getting gobbled up by smartwatches. Devices sold fell 17% to 5.4 million.

Now what

Fitbit in part attributed its poor performance to "rapidly changing market conditions," referring to the aforementioned ongoing cannibalization of the fitness tracker market. Ionic did not sell well because it was not positioned as a "mass-appeal smartwatch," instead focusing heavily on fitness and performance. The company plans on releasing a "mass-appeal smartwatch" later this year.

Fitbit's guidance also reflects the current challenges, saying it expects "limited revenue" from new products. Revenue in the first quarter is expected to fall 15% to 20% to $240 million to $255 million. Non-GAAP net loss per share is expected to be $0.18 to $0.21. That revenue forecast is significantly below the $340 million in sales that analysts were modeling for.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool has a disclosure policy.