Fitbit (FIT) Down 7.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Fitbit (FIT). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Fitbit due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Fitbit Q1 Loss Wider Than Estimated, Revenues Lag

Fitbit, Inc. reported first-quarter 2020 adjusted loss of 24 cents per share, wider than the Zacks Consensus Estimate of a loss of 22 cents.

The company’s total revenues came in at $188 million, down 30.8% year over year. The figure also missed the consensus estimate of $270 million.

The quarterly results were negatively impacted by the outbreak of COVID-19.

Let’s check out the numbers in detail.

Top-Line Details

During the first quarter, Fitbit sold 2.2 million wearable devices, down 26% year over year.

The average selling price decreased 11% from the prior-year level to $81 per device in the first quarter. This was due to an increase in reserves for product returns, rebates and promotions, as well as price protection related to COVID-19.

Geographically, revenues from the United States accounted for 54% of first-quarter revenues and decreased 24% year over year.

On a year-over-year basis, international revenues declined 37% to $86 million.  Americas — excluding the United States — declined 30% to $11 million, APAC was down 47% to $18 million and EMEA was down 35% year over year to $57 million.

Operating Results

Non-GAAP gross margin was 32%, down 220 basis points year over year. Gross margins were negatively impacted by higher reserves associated with COVID-19. Also, higher ending and obsolescence costs impacted gross margins.

Non-GAAP operating expenses were 146.4 million, down 2.9% from the year-ago quarter. However, research & development, sales & marketing, as well as general & administrative expenses — as a percentage of sales — increased from the year-ago quarter.

Non-GAAP operating loss was $84.9 million compared with a loss of $53.1 million in the year-ago quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents & marketable securities were $427.7 million compared with $518.5 million in the fourth quarter.

Accounts receivables were $182.3 million compared with $435.3 million in fourth-quarter 2019.

Cash flow from operations was ($82) million and free cash flow totaled ($85.5) million in the first quarter of 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -40% due to these changes.

VGM Scores

Currently, Fitbit has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Fitbit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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