Fitbit Inc. FIT reported third-quarter 2015 earnings of 19 cents per share, which breezed past the Zacks Consensus Estimate of 5 cents by a whopping 280%.
But this wasn’t enough.
Shares dropped 8.1% to $37.50 in after-hours trading despite the significant earnings beat and strong fourth-quarter guidance.
This was solely because the maker of fitness trackers announced that it intends to sell another 21 million shares, including 7 million primary shares and 14 million secondary shares. Fitbit also announced that lock-up restrictions on 2.3 million shares will be lifted on Nov 4.
According to the company, the proceedswill be used to provide additional working capital for Fitbit and for other purposes including research and development and sales and marketing activities, general and administrative matters, and capital expenditures.
In addition to the robust earnings beat, Fitbit reported revenues of $409.3 million, up a massive 167.7% year over year. This exceeded the guidance of $335–$365 million and surpassed the Zacks Consensus Estimate of $347.0 million by 18%.
The company sold 4.8 million connected health and fitness devices in the third quarter.
Sales growth was mainly attributed to three factors, namely, software improvements in existing products; marketing expansion in international markets and Fitbit Wellness.
The continued expansion of Fitbit’s corporate wellness program was a significant contributor. Over the last four months, 20 companies were added under the program, the most notable being Target and Barclays.
Despite intensifying competition from Apple Inc. AAPL, Samsung Electronics Co. and Jawbone, Fitbit has dominated the wearables market.
According to International Data Corp., Apple Watch recently took the #2 position in the worldwide wearables market, shipping 3.6 million devices in the second quarter, while Fitbit sold 4.4 million.
Heading into the holiday shopping season, Fitbit is set for even stronger growth. The company issued fourth-quarter revenue guidance of $620 million to $650 million, and raised the full-year outlook to between $1.77 billion and $1.8 billion, up from $1.6 billion to $1.7 billion.
Fitbit shares carry a Zacks Rank #3 (Hold).
Better-ranked stocks in the industry are JD.com, Inc. JD and Expedia Inc. EXPE, both sporting a Zacks Rank #1 (Strong Buy).
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