HMI - Is It Time to Give Up on FitBit's Stock?
Fitbit (NYSE: FIT) is facing serious issues. The latest chapter in this drama is that due to its new Versa Lite fitness smartwatch collecting dust on retail store shelves, the company has made a $150 million reduction in 2019 expected full-year revenue. The stock seems like a bargain, priced at less than two times its cash and investible assets, but it's cheap for good reason. The core device business is suffering and efforts to pivot haven't gained traction.
Let's look at where this fitness tracking device manufacturer is today and whether investors can bet on this underdog to beat the odds.
Investors love companies with pricing power like Walt Disney that can raise prices every year at its theme parks but still draw record crowds. Fitbit, on the other hand, seems to have lost that ability (if it ever had it at all). Stuck between low-priced competitors like Huami and the popular premium-priced Apple watch, CEO James Park says that it can succeed with products "in the $50 to $300 price range that are easy to use and feature-rich." But the track record of its average sales prices (ASP) shows its customers are less willing to pay up for its higher-priced products. In Q1 2018, ASPs peaked with the introduction of its first smartwatch, but have degraded to $86 in the most recent quarter and may not ever recover back to its highs.