Fitbit Shares Plunge as Forecast Misses Estimates on Spendingby
Blaze, Alta each sell a million units toward end of quarter
Company boosting investment to strengthen brand, boost network
Fitbit Inc. shares plunged after the maker of wearable fitness trackers gave a profit forecast that fell short of the lowest analysts’ estimates, citing increased spending on development, marketing and new features to attract users and keep them engaged.
The stock declined as much as 17 percent to $14.11 Thursday in New York. The San Francisco-based company said second-quarter profit excluding certain costs will be 8 cents to 11 cents a share, missing the 26-cent average projection of analysts in a Bloomberg survey. Sales will be $565 million to $585 million, Fitbit said in a statement, compared with an average prediction of $531.3 million.
Fitbit rolled out new gadgets Blaze, a smartwatch, and Alta, a slim activity-tracking wristband, in the first quarter, with each selling a million units each toward the end of the period. The second-quarter forecast reflects the company’s efforts to keep innovating and to fuel revenue growth from new products this year, as well as investment in features to boost the “network effect” of the company’s community of users and strengthen its brand among consumers, Fitbit said.
First-quarter adjusted profit was 10 cents a share, and revenue climbed 50 percent to $505.4 million, which topped the average analyst estimate of $444.6 million. Blaze and Alta generated 47 percent of revenue in the period, Fitbit said. Adjusted operating expenses rose to 39 percent of sales from 22 percent a year earlier.
Though the forecast for the current period disappointed, the company raised its revenue and profit projection for the full year. Adjusted profit for 2016 will be $1.12 to $1.24 a share, Fitbit said, and sales will be $2.5 billion to $2.6 billion. Previously, it estimated profit would be $1.08 to $1.20 per share on revenue of $2.4 billion to $2.5 billion.
The shares have declined 27 percent since the company’s initial public offering at $20 in June 2015.