Fitbit Falls As Smartwatch Demands Change

After Fitbit’s revenue and profit missed expectations, the company’s shares fell 12 percent to $4.90 in late trading on Monday (Feb. 26). The news comes as smartwatches are taking the place of fitness trackers, Barron’s reported.

Fitbit CEO James Park said the company was experiencing “rapidly changing market conditions.” In addition, the company is seeking to push its operating system and development kit to market. Furthermore, the company will hone in on “managing down expenses,” he said.

Analysts had expected Fitbit to generate $588 million in revenue and break even in the fourth quarter of 2017. Instead, the company’s revenue – over a three-month period ending in December – ended up at only $571 million. That created a loss of 2 cents per share, with the exclusion of some costs.

During the current quarter, the company is projected to earn revenues between $240 million to $255 million, which is below the average estimate of $340 million. As a result of the shift in consumer demand to smartwatches, the company plans to generate “limited revenue from new product introduction.”

Overall, the Apple Watch has been driving the wearables market – the company saw sales jump 60 percent in 2017, with 16 million units shipped. That’s according to CCS Insight – in a report on Thursday (Feb. 22), they predicted that worldwide wearables sales are forecast to grow an average of 20 percent annually during the course of the next five years, hitting $29 billion by 2022.

In the wearable category, CCS Insight said smartwatches are the most associated product, led by the Apple Watch. The firm estimated that around one quarter of Apple Watch sales in the fourth quarter of last year were the model that has built-in cellular, enabling consumers to make payments and phone calls.

As for fitness trackers, which used to be a big driver of wearable demand, the researcher said 40 million units were sold last year, which is down 23 percent from 2016 when shipments peaked. Fitbit and Huami are the leaders in the category, with a combined market share of 80 percent. Huami is in first place as it goes after its home market of China.