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Why Fitbit, MannKind, and Avon Products Slumped Today

By Dan Caplinger – Jan 5, 2016 at 6:53PM

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Several stocks weren't able to enjoy the market's modest bounce on Tuesday. Find out why.

Image: Fitbit.

For investors who were frightened by Monday's plunge, signs of stabilization in the stock market were a welcome sight, even if the rebound in most major market benchmarks was marginal, at best. The Dow and S&P 500 posted gains of 0.2% or less on Tuesday, as longer-term fears that the long bull market in the U.S. stock market might finally be coming to a close outweighed some signs of strength from certain sectors of the economy. Among the biggest decliners on the day were Fitbit (FIT), MannKind (MNKD 5.64%), and Avon Products (AVP).

Fitbit dropped 18% after the maker of exercise-tracking hardware released new products at the Consumer Electronics Show in Las Vegas that failed to inspire strong enthusiasm among shareholders. The company unveiled its Fitbit Blaze, a smart fitness watch that offers enhanced fitness features like connected GPS, heart-rate tracking, and on-screen workouts, as well as stylish design and targeted notifications. Pre-orders began today, with release of the Blaze expected in March, with a price point of $200.

The question that investors have is whether the fitness ecosystem that Fitbit has tried to build will have enough of a positive network effect to drive consumers toward buying the Blaze rather than looking to alternative wearable technology with broader application beyond the fitness realm. Today's drop sent Fitbit shares below their trading price on the first day after its IPO, as some had predicted due to the tough competitive environment.

MannKind plunged by nearly half after key marketing partner Sanofi elected to end its partnership with the maker of the Afrezza inhaled-insulin product. MannKind said that the two companies will start talking about a transition plan that will allow them to disengage smoothly during the next three to six months, with a final deadline set for July 4. Because of the move, MannKind said that it would review its strategic options for the product, perhaps in the hope that it can find another partner to market Afrezza.

Yet the problem that the company faces is that Afrezza's sales have been minimal despite extensive efforts on the part of Sanofi. MannKind's financial position makes it practically impossible for the company to fund its own marketing initiative, and the share-price plunge shows the skepticism with which shareholders weigh the likelihood of finding a deal similar to what the company had with Sanofi.

Finally, Avon Products fell 10%. The move was most likely a result of the beauty-products manufacturer being named as a bearish pick by an analyst firm, which cited plummeting revenue and disappointing bottom-line results as driving the company's prospects downward. Avon has had to take dramatic steps to try to shore up its business, choosing to sell a stake to private hedge-fund investment firm Cerberus Capital Management in December.

Even though the deal will result in a total of more than $600 million coming into Avon's coffers, the Cerberus arrangement muddied the cosmetics company's operational waters, with existing investors criticizing aspects of the transaction. Given the heightened competition in the industry, it's far from a sure thing that Avon Products can successfully execute a turnaround, even with its well-known brand name and global presence.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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