Fitbit Inc. (NYSE: FIT) reported better-than-expected second-quarter financial results after the markets closed on Tuesday, and analysts are already pouring into the stock. All in all, analysts agree that this company is providing exposure to the rapidly growing health and fitness wearable market and it is a company that is both highly profitable and experiencing hyper-growth.
24/7 Wall St. has included some of the highlights from the earnings report, as well as what analysts are saying after the fact.
The company said that it had $0.12 in earnings per share (EPS) on $587 million in revenue in the quarter. Thomson Reuters consensus estimates had called for EPS of $0.11 on $578.48 million in revenue. In the same period of last year, Fitbit posted $0.21 in EPS and revenue of $400.41 million.
During the second quarter, the company sold 5.7 million devices (the best quarter to date yet), while total devices sold to date is 48.7 million. New products, such as the Fitbit Blaze and Alta, including related accessories, comprised 54% of second-quarter revenue, versus 50% in the first quarter.
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The total revenue breakdown was 76% from the United States, 17% from EMEA, 2% from APAC and 5% from other Americas. Revenues grew by 42% in the United States, 150% in EMEA and 63% in other Americas, but revenues fell in APAC by 54%.
In terms of outlook for the third quarter, the company expects to have EPS in the range of $0.17 to $0.19 and revenues between $490 million and $510 million. The consensus estimates are $0.17 in EPS on $498.53 million in revenue.
Merrill Lynch reiterated a Buy rating but lowered its price objective to $24 from $29. The firm further detailed in its report:
Solid 2Q beat despite headwinds from warranty reserve adjustment and major Australian retailer loss in APAC. Gross Margins depressed due to $35mn warranty reserve on legacy products; Expect margins to bounce back in 3Q. Reiterate Buy; Fitbit’s solid quarterly results, lower multiple, and accelerating growth to eventually wear bears down.
The firm noted that Fitbit is accelerating in core markets although the Asia-Pacific region is challenged, headline gross margins are depressed due to charge and investor sentiment is too negative for results this good.
Overall it looks like it will be difficult to forecast demand for fitness bands next year. Merrill Lynch expects Fitbit’s accelerating growth and high profitability to eventually wear down the overly bearish investor sentiment. Ultimately, the brokerage firm is positive on Fitbit’s growth prospects, tailwind from an expanding market space, international opportunities, as well as the platform’s potential.
Standard & Poor’s maintained its Hold rating and lowered its target to $17 from $20. The firm positively views momentum for Blaze and Alta devices but it expects competitive pressures to intensify.
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A few other analysts weighed in on Fitbit after the report:
- Leerink Swann has a Market Perform rating and lowered its price target to $16 from $18.
- Morgan Stanley reiterated an Overweight rating with a $31 price target.
- Deutsche Bank has a Buy rating with a $29 price target.
Shares of Fitbit were trading up 9.5% at $14.42 on Wednesday, with a consensus analyst price target of $21.63 and a 52-week trading range of $11.65 to $51.90.
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