Fitbit (FIT) is floundering. Following the fitness device maker’s announcement that it will see slower-than-expected growth in Q4 2016, the company’s stock fell off a whopping 30%.
So what went wrong for Fitbit? Well, a few things, actually. Issues ranged from product launch difficulties, supply constraints and poor performance in the Asian markets.
One of Fitbit’s biggest problems, according to the company at least, was how and when it launched its newest devices: the Fitbit Flex 2 and Fitbit Charge 2. Fitbit said it went out of its way to ensure that the products launched faster than previously expected, getting them out of the door and on the market by the end of Q3 2016. The problem with that is by launching the products early, revenue that was initially anticipated for Q4 ended up moving to Q3 instead.
As a result, Fitbit anticipates that it will see between just 2% and 5% growth in Q4 of this year. As a point of comparison, the company saw revenue increase by 92% in Q4 2015 versus Q4 2014. That’s a massive slowdown in growth.
Fitbit also ran into production problems with the Fitbit Flex 2 resulting in supply constraints that are expected to further impact Q4 earnings. Then there was the company’s performance in Asian markets, where sales fell by 45%.
But hope isn’t lost for Fitbit. The wearables industry is still expected to grow in the coming years, and as of now, Fitbit represents about 25% of the entire market. The company said it’s also looking to expand its product line into additional form factors to help increase consumer interest.
“Fitbit still has a lot on its side, with strong brand recognition, broad distribution, and multiple devices at multiple price points,” said IDC Research’s Ramon Llamas. “We cannot say the same for other [companies], and I’ve seen a number of vendors reduce and/or not refresh their product portfolios, which is a bit risky considering we’re heading into the holiday season.”
Llamas says he believes the fitness tracker market is at a point where vendors are updating their devices without offering any new or meaningful features that will entice consumers.
“The emphasis on design and software have been good so far, but I think we’re still just scratching the surface of what else wearables can do,” he said. “For this, I look forward to more sensors capturing new fitness and health data; full time cellular connectivity; computing that is practically invisible so that the devices melt into the background and all you see is the product (like a watch or clothing).”
So, yes, Fitbit is in for a bumpy ride. But it is far from finished.
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