Fitbit Inc. FIT is set to report first-quarter 2018 results on May 2. Notably, Fitbit's results surpassed the Zacks Consensus Estimate in three out of the trailing four quarters. It has an average four-quarter positive surprise of 43.3%.
The company's shares have lost 6.9% in the past 12 months, underperforming the industry’s gain of 32%.
The company’s growth has been hampered by increasing competition in the fitness wearable category, lack of upgrades among existing users and lackluster growth in the Asia Pacific region.
Let’s see how things are shaping up for this announcement.
Increasing Competition From Other Players
Fitbit, which became a prominent name for its simple fitness wearables, has been hurt by massive competition in the market. It faces competition in both the high and low-end product range. On the high-end front, it competes with Apple Watch. Although Fitbit expected Ionic to help the company take on Apple, it is hardly an easy task to compete with one of the biggest companies in the world. Also, many big manufacturers are developing connected devices on Google's Android operating system.
On the lower end, fitness-tracking devices from Jawbone, Garmin Ltd. (GRMN) and Xiaomi also pose tough competition. Even the launch of its flasgship Ionic and addition of innovative features have not helped it stay ahead of its competitors.
Fitbit’s Initiatives to Drive growth
The company has been introducing new products to increase its revenue base. Yet,these products are unable to drive enough revenues for the company. However, its efforts to further diversify business, and focus on health and wellness could help the company drive revenues in the first quarter.
Also, Fitbit is taking other initiatives that are expected to pull out the company from slow growth. These steps include offering a streamlined set of products, improving software and services to offer more personalization to customers, and achieving greater integration into the healthcare ecosystem. In this regard, the company recently announced its plans to acquire Twine Health, a health coaching platform. This will further expand its share in the healthcare business, thereby increasing its subscription-based revenues.
For the first quarter of 2018, Fitbit expects revenues to remain in the range of $240-$255 million. The Zacks Consensus Estimate is pegged at $246.1 million.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Fitbit has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -6.33%, not indicating a likely positive earnings surprise. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Stocks to Consider
Here are a few stocks you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat in the to-be-reported quarter.
Mastercard Incorporated MA has an Earnings ESP of +0.03% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
WEX Inc. WEX has an Earnings ESP of +0.44% and a Zacks Rank of 2. The company is slated to report quarterly results on May 3.
FLEETCOR Technologies, Inc. FLT has an Earnings ESP of +0.79% and a Zacks Rank #2. The company will report quarterly numbers on May 3.
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