How Fitbit Looks After Earnings and a Secondary Offering Announcement

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Fitbit Inc. (NYSE: FIT) reported its third-quarter financial results after the markets closed on Monday. However what is really moving the stock in Tuesday’s session is a secondary offering of Fitbit’s stock, not to mention that it will shed lockup restrictions from the initial public offering (IPO).

The wearable fitness tracking device maker reported earnings per share (EPS) of $0.24 on revenues of $409.3 million. In the prior quarter, Fitbit’s first as a publicly traded company, it posted adjusted EPS $0.21 and revenues of $400.4 million, the most in the company’s history. Analysts were expecting third-quarter EPS of $0.10 on revenues of $350.97 million.

Probably anticipating a warm reception from the investment community, Fitbit also announced that it will have a secondary offering of 21 million shares, of which the company will sell 7 million and certain stockholders will sell the rest.

The proceeds of the company’s portion of the proposed offering will be used to provide additional working capital for Fitbit and for other general corporate purposes, including research and development and sales and marketing activities, general and administrative matters, and capital expenditures. As part of the underwriting procedures, all selling stockholders, as well as all executive officers and directors, will agree to enter into lock-up agreements for a period of 90 days following the proposed offering.

Effective Wednesday, November 4, roughly 2.3 million shares will shed lockup restrictions imposed at the time of the June 18 IPO. The lockup expiration applies to stock held by employees and consultants and is being raised ahead of the original December date to give these stockholders a liquidity opportunity in advance of year-end.

A few analyst calls were issued within the past week:

  • Cowen reiterated a Market Perform rating with a $41 price target.
  • Piper Jaffray reiterated a Buy rating.
  • Leerink reiterated a Buy rating.

Shares of Fitbit were trading down nearly 7% to $38.10 Tuesday, with a consensus analyst price target of $52.20 and a 52-week trading range of $29.50 to $51.90.

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