Fitbit Inc. shares are plunging in premarket trading Thursday after the wearables pioneer slashed its third-quarter and full-year forecasts, reflecting a disappointing showing for the lower-priced Versa Lite smartwatch, which launched earlier in the year.
Read: Fitbit launches cheaper Versa smartwatch, tracker for kids as young as 6 to broaden appeal
Chief Executive James Park said that the company misjudged consumer attitudes on smartwatch pricing with the Versa Lite introduction as he now realizes that customers either want more expensive devices with additional features or they want promotional pricing.
The stock FIT, -3.00% is down 15.2% premarket and set for its worst single-day drop in years.
Citi Research analyst Jim Suva wrote that he has “big concerns” about Fitbit’s future, while maintaining a sell rating on the stock and cutting his price target to $2 from $5.
“While the company is going after the healthcare industry which is in need of great assistance from such products we are concerned Fitbit may not have the capital, personnel and time, to materially see traction in this sector,” he wrote in a note to clients. Suva also argued that Fitbit’s opportunities are hampered by the fact that the company lacks “full two-way texting functionality” on its smartwatches. Apple Inc.’s Apple Watch offers that capability.
Wedbush analyst Michael Pachter maintained his neutral rating on the stock, writing that he sees limited growth drivers for the company while profitability remains an “elusive” target.
“Long-term, shares of Ftibit could expand if services revenue ultimately launches the company back to profitability,” he wrote. “However, it is taking longer than expected to roll out and expand these services. Meanwhile, devices sales are stagnating as both the novelty wears off and competition increases.”
He has a $4 target price on the stock.
Opinion: Fitbit Versa Lite is a pretty good value if exercise is the goal
D.A. Davidson analyst Tom Forte said he is “disappointed” by Fitbit’s weak outlook but still optimistic about the company overall. Among Forte’s positives is that the company has a strong cash balance that accounts for more than half of its market value.
He rates the stock a buy but lowered his price target to $5.75 from $7.
Oppenheimer analyst Andrew Uerkwitz also stayed upbeat on the stock, arguing that the Versa Lite missteps are overshadowing progress in Fitbit Health Solutions, which saw revenue rise 41% in the first half of the year.
“Hardware issues aside, Fitbit Health Solutions continue to grow nicely, and management indicated relationships with leading healthcare providers continue to improve,” he wrote. “We see these as validating our thesis as Fitbit being a key player in the digitization of health/wellness.”
Uerkwitz rates the stock at outperform but reduced his target price to $7 from $8.
Fitbit’s stock is down 15% so far this year through Wednesday’s close, compared with a 19% rise for the S&P 500 SPX, -1.09% over that time.
