According to BNP Partners, wearable fitness device maker, Fitbit, has reported earnings and revenues that beat Wall Street expectations by a comfortable margin but saw its shares plunge by as much as 15% in after-hours trading on worse-than-expected projected earnings for the first quarter of 2016.
The company reported 4th quarter earnings of 35 cents a share on revenue of $712 million compared with 21 cents a share and revenue of $370 million a year earlier. Analysts were expecting 25 cents a share on $648 million.
It was the company's estimates of its earnings for the current quarter that prompted the selling. The company said it projected revenue of $420-$440 million against analysts' expectations for $484 million.
“Fitbit's stock has shed more than 40% in 2016 alone,” explained Yannick Touré, BNP Partners' chief economist. “Investors are worried about competition from other manufacturers that offer cheaper alternatives,” he continued.
Fitbit's stock traded around $16 after the regular trading session had ended which is considerably lower than the $20 it debuted at in its initial public offering last year. Furthermore, research has shown that many users of its devices tend to stop wearing them after a few months.
“Fitbit is the latest in a long line of what we call “fad companies” that captured the irrational exuberance of investors during the easy, super-cheap QE days. Now that cheap money has come to an end, companies like Fitbit, GoPro and several others are finding themselves and their shareholders in deep water. We don't expect a dramatic recovery in their fortunes any time soon,” concluded Touré.
About BNP Partners:
At BNP Partners, they define effective wealth management as an overall strategy that seamlessly integrates their clients' personal ROI (return-on-investment) aspirations with their investment management prowess.
Whilst today's markets can often demonstrate the type of characteristics that have served to hamper the efforts of many traditional investment methodologies to secure the returns they once did, BNP Partners continue to secure exceptional returns for their esteemed clients utilizing a meticulously applied combination of those same traditional methods whilst diligently complementing them with new, pioneering techniques.
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By Sean Nichols