Technology Stocks

Fitbit Inc (NYSE:FIT) Shades Market Cap Amidst Tough Competition

When Fitbit Inc (NYSE:FIT) reported its third quarter Financial statements, the company’s shares ramped up 26% to a near record-breaking $6.10. On the heels of cutting throat competition in the wearables market, the company managed to surpass revenue from the previous quarter only to shade its market share.

The aftermath of the Q3 2018 Report

Fitbit Inc (NYSE: FIT) announced its third-quarter earnings on October 31, and as aforementioned, the announcement was followed by a quick rise in the value of its stock by roughly 26%. Against all the odds the company made adjusted earnings per share (EPS) of –0.04 compared to -0.33, -0.27 and -0.12 for the previous four quarters respectively. The Q3 EPS represents the first profit the company has reported in the previous three quarters and subsequently in the last two year.

And because the market always swings as it pleases, FIT’s shares dropped after some time and are currently trading below $5.0 against its 52-Week high of $7.79.

Source: StockCharts.com

The euphoria in the company’s stock after the Q3 report was caused by short-sellers disposing of their stock to avoid making losses when the company’s stock prices rise.

Measures to Increase Earnings

Although Fitbit made a tiny increase in its Q3 revenue to $393.6 million from the previous $392.5 million, it should be considered that the numbers would have been worse. The company instigated cost-saving measures notably cutting down its operating expenditure by a whopping 17%.

It is important also to note that Fitbit’s sales volume declined and naturally that would have affected its revenue except that high product pricing and the reduction in operating expenditure saved the day.

Besides the cost-cutting, the company also beefed up its product line, which in return paid off handsomely. Its debut into the smartwatch business is already yielding big returns as the category single-handedly made up almost 50% of the gross revenue.

The company’s Versa brand is the second best selling smartwatch barely a year after launch, an indication that the category was a worthwhile investment. The company also launched Fitbit Charge 3, a conventional fitness tracker that is expected to take the market by storm in the near future although the line is figuratively dragging at the moment.

The Future of Fitbit

So far so good for Fitbit. However, a long-term investor would argue that the current numbers are good for short-term traders and worrying for them. The company is merely clinging on the edges, not showing significant growth to draw investors’ interest. Relying on cost-cutting measures is never a long-term solution and the fact that the company dropped its market share to 10.9% from 13.7% is certainly a deal-breaker.

Technically, Fitbit is ranking at position three tailing Apple Inc. (NASDAQ:AAPL) and Xiaomi respectively. This coupled with declined sales volumes shows a company that is survival mode for nobody knows how long.

Taking a closer look into the company’s latest numbers, it is clear that the company is in dire need of growth strategies to register ground-breaking revenue growth and stock prices. But for what it’s worth IDC statistics indicated that the wearables market is growing and perhaps the company’s stock will grow in the future. Nonetheless, the company should shake things up soonest that it may not stumble the Nokia (NYSE:NOK) and BlackBerry Ltd (NYSE:BB) way- overstaying in a fairly good position can quickly turn against anyone even the mightiest.

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