Is Fitbit (NYSE: FIT) going down?
The company just posted its fifth consecutive quarterly loss. And shareholders are very concerned with Fitbit’s performance over the past five financial quarters.
On Tuesday, February 24th, its shares fell 14% after announcing that its newest smartwatch wasn’t living up to expectations.
It doesn’t come as a surprise that investors are questioning whether or not Fitbit will ever be profitable again. I’d be wondering the same thing if I were a shareholder.
Shares are trading 76% below their IPO price. Not only that but, within the past 12 months, shares have fallen 10%.
The company launched its Fitbit Ionic smartwatch this past October and priced it at $300. When Fitbit launched its newest smartwatch, it was hoping to gain a different wearable demographic.
However, that wasn’t the case at all.
Prior to launching the company’s newest smartwatch, executives reassured investors about the upcoming product. They also told investors that the company would be focused on selling smartwatches in 2018 that would attract a wider user base.
Introducing a much cheaper smartwatch, in comparison to Apple’s smartwatch, seemed like a great idea. Apple Watches range from $329 to $1,399.
So, Fitbit’s Ionic smartwatch seems like it would be a cheaper and more practical alternative.
According to CCS Insight, the wearables market will be worth $25 billion by 2019.
The wearable market includes devices like smartwatches, fitness trackers, augmented and virtual reality headsets, and wearable cameras.
If Fitbit were to gain control of the fitness tracker and smartwatches section of the wearables market, it could give the company a decent chunk of market share.
Allied Market Research has reported that it’s expecting the global smartwatch market to reach $32.9 billion by 2020 globally…
Are Smartwatches Losing Their Appeal?
But is this growth enough?
Will Fitbit investing in this section of the wearables market be worth it?
Cindy Liu, an eMarketer analyst, discusses the less-than-optimistic stance on smartwatches: “Consumers have yet to find a reason to justify the cost of a smartwatch, which can sometimes cost as much as a smartphone.”
With that said, you’d still think that Fitbit would be able to grab the consumers who are looking for something cheaper.
But is $300 really that cheap? Or is it just at a price point for the average consumer?
Companies have yet to make smartwatches seem like a necessity. They’ve yet to include something that hooks users in and makes them feel like they need to own a smartwatch.
Right now, it’s just an expensive accessory. Leaders in the market are trying to capture an audience by focusing on how the smartwatch can be paired with smartphones and how it’s waterproof.
These aren’t necessarily features that would make a consumer jump at the opportunity to fork over $300 or more.
The key is to get mass appeal…
Fitbit Striving to Gain Mass Appeal
Fitbit is coming out with a smartwatch that’ll attract consumers. It’s different from the Ionic, and it’s also expected to be smaller and have a sleeker design.
Leaked images show that the Fitbit Blaze 2 is designed to appeal to the female market.
The watch is supposedly waterproof up to 50 meters, runs with the same operating system software as the Ionic’s, and has a similar SpO2 sensor, which monitors blood oxygen levels and sleep apnea.
This new watch is rumored to be coming out in the U.S. this spring and will be available in black, silver, rose gold, and charcoal colors. It’s expected to cost a lot less than Fitbit Ionic ($300). And if it ends up being significantly cheaper, that would help with getting the product onto the wrists of consumers.
Fitbit has the opportunity to take over the smartwatch market and to do it in a way that’ll make consumers feel like its watches will benefit their lives.
Fitbit’s business model has been built around the health-conscious individual. People want to be healthy and to monitor their health. If Fitbit continues to invest in incorporating different types of health tracking into its wearable devices, it’ll benefit the company.
Other smartwatches don’t carry the same options.
Imagine a mass-appeal product like Fitbit’s upcoming smartwatch with health-tracking features that no other smartwatch has.
I think the true test for Fitbit will be to see how this new product does on the market.
Until next time,
Jennifer Clark
Pro Trader Today