On Thursday trading Fitbit Inc. shares are plunging after the wearables pioneer cut its third quarter and full-year forecasts, by reflecting a disappointing showing for lower priced Versa Lite smartwatch that launched Jim Suva at Citi Research earlier in the year.
The Chief Executive James Park said that the company has misjudged the consumer attitudes on smartwatch pricing, with the Versa Lite introduction, as he now realizes that the customers either want more expensive devices along with the additional features or they want the promotional pricing.
Fitbit shares are down 20% in morning trading, and FIT stock is on track to post its worst single day drop since Nov. 3, 2016, when it slid 34 percent.
An analyst Jim Suva at Citi Research wrote that he has big concerns about Fitbit’s future, while he maintained a “sell” rating on the stock and also cutting his price target from $5 to $2.
“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.
A Wedbush analyst, Michael Pachter has given “neutral” rating on the FIT stock, citing that he sees limited growth drivers for it while profitability remains an elusive target and he has a $4 target price on the FIT stock.
“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.”