Fitbit is going to have a rough holiday season as the company shared a disappointing outlook for the next quarter on yesterdayâs earnings call. As a result, Fitbit shares (NYSE:FIT) opened at $9.03, down 29.5 percent compared to yesterdayâs closing price of $12.81.
So what happened exactly? Fitbitâs earning report yesterday wasnât great, but it wasnât too bad either. According to Forbes, earnings were in line with the analystsâ expectations, and revenue was slightly below expectations â $504 million vs. $507 million.
This doesnât seem enough to tear the company apart on the stock market. The issue is whatâs going to happen next. Fitbit devices seem like the perfect gift for the holidays. But Fitbit says itâs not going to be the huge quarter investors expected.
Fitbitâs own outlook says that earnings per share are going to be between $0.14 and $0.18, well below expectations of $0.75 per share, according to the WSJ.
One reasons is that Fitbit expects to sell less device (between $725 million and $750 million vs. $985 million expected). And itâs not just a demand issue. Fibit released the Flex 2 earlier this month, and the company is now facing production issues.
A soft demand combined with limited availability for the latest device means that the next three months are going to be tough. The Flex 2 could have boosted the companyâs sales, but people could delay their purchase or buy something else if they canât find it.
The company now has a market capitalization of $2 billion. It seems pretty cheap for a powerful consumer brand with a good distribution strategy. It makes me wonder whether companies are looking at Fitbit as a potential acquisition target.