Please ensure Javascript is enabled for purposes of website accessibility

Stock Market News: Shopify Sails Higher as Fitbit Gets Hit

By Dan Caplinger – Aug 1, 2019 at 10:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock market recovered Thursday morning from its post-Fed swoon yesterday.

The stock market gained ground Thursday morning, quickly getting over its tantrum following Wednesday afternoon's rate cut from the Federal Reserve. Investors initially weren't happy with comments from Fed Chair Jerome Powell suggesting that further rate cuts weren't as likely as previously thought. Yet today's move higher reflects confidence in the economy. As of just before 11 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.00%) was up 187 points to 27,052. The S&P 500 (^GSPC 1.97%) rose 21 points to 3,002, and the Nasdaq Composite (^IXIC 0.00%) picked up 103 points to 8,278.

A lot of companies are announcing their latest financial results, and as you'd expect, some reports are good, while others leave something to be desired. Shopify (SHOP 4.99%) gave investors something to smile about in its second-quarter earnings, but Fitbit (FIT) continued to struggle to find a pathway forward to sustained growth.

Shopify keeps its sales moving higher

Shares of Shopify rose almost 10% after the provider of e-commerce business tools reported continued strong growth in the second quarter of 2019. Shopify said that revenue for the quarter was higher by 48% from year-ago levels, and adjusted net income soared more than sixfold over the same period.

Shopify logo with green shopping bag icon with white S.

Image source: Shopify.

Shopify has worked hard to help entrepreneurs and others seeking an online presence for their businesses have the tools they need to succeed, and the company pointed to a lightning-fast pace of innovation. Early access to the Shopify Fulfillment Network should help clients cut their shipping costs, while the new Shopify Plus platform provides assistance in managing organizational business issues. Point-of-sale software and native language capabilities in 18 languages make Shopify a global e-commerce power, while the relatively new Shopify Capital division extends credit to help merchants have the financial liquidity they need to operate more effectively.

Shopify also has high hopes for the future. It raised its revenue guidance for the full year, expecting top-line growth of more than 40% in 2019.

E-commerce isn't going anywhere, and companies need access to make the most of their online opportunities. Shopify provides that access, and its latest results show no signs of slowing in sight.

Fitbit loses a step

Meanwhile, Fitbit's stock plunged 19%. The maker of wearable fitness devices didn't get the customer reception that it wanted for its Versa Lite product line, and that contributed to its decision to cut its outlook for the full year.

Fitbit's performance didn't look terrible in all respects. The company saw a 31% rise in number of devices sold in the second quarter of 2019, and that helped contribute to a 5% increase in revenue from year-ago levels. In particular, tracker devices saw a 56% jump in unit sales year over year.

However, Fitbit displayed weakness in several key areas. Smartwatch sales fell 7% in unit terms, and average selling price for products overall was down 19%.

The third quarter could be even tougher for Fitbit. The wearables specialist sees revenue declining 10% to 15% from year-ago levels, driven by falling average selling prices despite higher unit sales. Fitbit cut $95 million off its full-year sales projections, predicting a new range between $1.43 billion and $1.48 billion.

Wearables have been a big consumer phenomenon, and it's disappointing to see Fitbit have so much trouble capitalizing on an area it helped to pioneer. Until it finds a more successful strategy, however, Fitbit could keep delivering negative surprises to its shareholders.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fitbit and Shopify. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fitbit, Inc. Stock Quote
Fitbit, Inc.
FIT
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$29.24 (4.99%) $1.39
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,134.99 (0.00%) $0.00
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,719.04 (1.97%) $71.75
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$10,829.50 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.