Fitbit Inc.FIT is set to report its first quarterly results for the second quarter of 2015, as a public company, on Aug 5.
Let us see how things are shaping up for this announcement.
Factors at Play
Founded in 2007 and headquartered in San Francisco, CA, Fitbit specializes in wearable activity tracking devices that record personal data, including the number of steps taken, distance traveled, calories burned, and other wellness related metrics. The company sells its products primarily through retailers and distributors.
Fitbit went public on Jun 18 and trades on the NYSE. The company priced its initial offering at $20 a share.
According to Fitbit’s SEC filing, 10.9 million units were sold in 2014, more than double the 2013 figure. The company posted net income of $132 million from $745 million in revenues. This is a sharp turnaround from a net loss of $52 million incurred in 2013. The company also reported over 6.5 million active users.
According to research firm NPD Group, Fitbit had 68% share of the U.S. fitness tracking device market last year on dollar terms. According to Seeking Alpha, Fitbit had 85% share of the U.S. fitness tracker market in the first quarter.
Going forward, the company's overseas growth (international accounted for merely 20% of revenues last year, according to Seeking Alpha) and the rise of corporate wellness programs are expected to be a major driver in adding users to the Fitbit ecosystem.
However, Fitbit faces stiff competition from several fitness-device makers such as Garmin Ltd. , Jawbone and Misfit. However, Apple Inc.'s recently launched Apple Watch, offering a host of health-related features and apps could be a major competitor.
Earnings Whispers
Our proven model does not conclusively show that Fitbit will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP:While the Most Accurate estimate stands at 5 cents, the Zacks Consensus Estimate stands at $7 cents. Hence, the difference is -28.57%.
Zacks Rank:Fitbit’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here are some companies which you may consider instead, as our model shows they have the right combination of elements to post an earnings beat this quarter:
ZAGG Inc ZAGG, with an Earnings ESP of +12.50% and a Zacks Rank #2.
Sprint Corporation S, with an Earnings ESP of +25.00% and a Zacks Rank #3.
Interxion Holding NV INXN, with an Earnings ESP of +6.67% and a Zacks Rank #3.
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