Fitbit (FIT) Stock Falls on Reduced Guidance, Layoffs

Shares are wearable device maker Fitbit (FIT) were crushed in the pre-market session Monday, falling more than 12% to a session low of $6.30 after the company announced Monday it will reduce its workforce by 5% to 10% and said it expects lower-than-expected fourth-quarter results, according to a report from technology news site The Information.

The San Francisco, Calif.-based company said it may cut between 80 to 160 job across multiple departments, reports The Information. Fitbit had some 1,630 employees as of the most recent quarter. If it cuts 160 jobs, this would translate to 10%. This Is the second straight quarter in which Fitbit has disappointed investors due to a slowdown in the wearables market.

The Information reports that in addition to the job cuts, which was voted on last Wednesday by Fitbit’s board, the company is also undertaking a reorganization, aimed at reducing costs by about $200 million. The cost cutting initiative would be an about-face from the company’s prior M&A strategy aimed at growing market share to better compete with Apple (AAPL).

Over the past year, Fitbit has gone on an acquisition spree, picking off companies/technologies such as Coin, Pebble, and Vector. Reports suggest it also went — unsuccessfully — after rival Jawbone. Despite these deals, however, Fitbit stock has been punished, losing some 56% over the past year, including more than 46% declines just in the past three months.

During that span, the company has also unveiled two new wearable devices, the Charge 2 and the Flex 2, that were supposed to drive big sales during the holidays. The company’s reduced guidance suggests that those devices not only didn’t resonate with consumers, the company might have lost market share it expected to gain.

According to a recent report by Kantar Worldpanel ComTech, some 15.6% of U.S. consumers owned a smartwatch or fitness band as of December. That marks a slight increase from 14.8% in September. But Fitbit’s announcement Monday implies that the Apple Watch, not Fitbit’s new products, might have been the driver of that growth during the all-important holiday quarter.

Fitbit stock closed Friday at $7.21, down 2.70%, recently touching a new 52-week low of $6.97. As it stands, if you’ve only bought and held Fitbit stock since its IPO in 2015 then you're down about almost 80% on your investment. And despite the appearance of a cheap price, investors would be better served to avoid Fitbit stock until the company reports earnings next month and hear what the management has to say about growth expectations for 2017.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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