Should You Buy Fitbit?

Fitbit (FIT) recently posted impressive results as it beat expectations on both revenue and earnings. The company’s revenue almost tripled in the quarter as compared to the same quarter last year, driven by solid demand from markets outside America. Further, its non-GAAP diluted earnings per share rose to $0.24 for the quarter as compared to $0.13 per share for the third quarter last year.

The quarter in detail

Fitbit delivered solid results for the third quarter. Its revenue for the quarter increased to $409.3 million, almost tripling from $152.9 million for the same quarter last year.
The quarter performance was driven by a strong competitive position and improving market share.

Fitbit posted $198 million in gross profit for the quarter, up from $82 million last year. Its gross profit as a percentage of revenue for the quarter was 48.3% as compared to 53.9% for the third quarter of 2014.

Moving ahead, Fitbit saw an increase in operating expenses to $116.9 million from $44.2 million last year. But, more importantly, Fitbit posted operating income of $80.8 million for the quarter as against operating income of $44.3 million in the year-ago period.

Furthermore, Fitbit generated net income of $59.2 million for the quarter, higher than the net income of $27 million for the third quarter in the previous year. Its adjusted EBITDA went up to $85 million from $44 million for the same quarter last year.

Strong growth across the board

Fitbit’s from the United States went up to $270.8 million from $117.9 million last year, and accounted for 66% of its total revenue. Its revenue from the Americas, after excluding the United States, increased to $24.1 million for the quarter from $6.2 million last year, being 6% of the total.

Meanwhile, its revenue from Europe, Middle East, and Africa increased to $49.2 million from $12.8 million last year, while revenue from APAC rose to $65 million from $15.7 million in the prior-year period. More importantly, its U.S. revenue increased 130% year-over-year, revenue from APAC increased 314% year-over-year, and revenue from Europe, Middle East and Africa increased 282% year-over-year. Thus, the company saw strong growth across the board.

Making moves to grow the business

Fitbit has entered into a partnership with Genuine Thermos Brand, where it will be introducing a new Thermos that will be connected with a Hydration Bottle along with a Smart Lid. This will help customers maintain their overall health and energy.

Further, in order to drive employee engagement, the company will be launching the Fitbit Corporate Challenge, which will be the part of company’s wellness offering. In addition, Fitbit has also introduced Fitbit for Windows 10 app, which will help users personalize their way of interacting with the key pieces of fitness and health journey across Windows devices. Additionally, Fitbit is making efforts to optimize its global footprint growth with specific focus on China.


Hence, Fitbit is making a number of smart moves that will enhance the company’s performance in the long run. So, I think investors should invest in the stock for long-term gains and benefit from the growing adoption of wearable health devices.
Published on Nov 9, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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