How Analysts View Fitbit After Earnings

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Fitbit Inc. (NYSE: FIT) reported better-than-expected second-quarter financial results after the markets closed on Tuesday. As a result, analysts are weighing in on this fitness wearable company. 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 posted $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 was 48.7 million. New products, such as the Fitbit Blaze and Alta, including related accessories, comprised 54% of second-quarter revenue, up from 50% in the first quarter.

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.

A shared sentiment among analysts is 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.

Wells Fargo has a Market Perform rating with a valuation range of $14 to $15. This firm assumes Fitbit trades at a discount to the average consumer wearables company. Risks to this valuation include capital markets volatility, increasing competition and loss of consumer interest for fitness wearables.

Merrill Lynch is positive on Fitbit’s growth prospects. Ultimately it sees a tailwind from an expanding market space, international opportunities and the platform’s potential. Merrill Lynch detailed in its report:

Despite the company’s low multiple (just 8x our $1.70 non-GAAP ’17 estimate) and history of exceeding expectations (they have beat Street each of their five public quarters), roughly 33% of FIT’s float is short. Although we agree it is difficult to forecast demand for fitness bands next year, we expect Fitbit’s accelerating growth and high profitability to eventually wear down the overly bearish investor sentiment. We reiterate our Buy rating while lowering our PO from $29 to $24 based on a more conservative 14x 2017 expected EPS.

A few other analysts weighed in on Fitbit after earnings were reported:

  • Deutsche Bank reiterated a Buy rating and raised its price target to $29 from $28.
  • FBN Securities has an Outperform rating and a $25 price target.
  • Leerink maintained a Market Perform rating and lowered its price target to $16 from $18.
  • Wedbush maintained an Outperform rating and an $18 price target.
  • S&P has a Hold rating and a $17 price target.

Shares of Fitbit closed trading at $15.40 on Friday. The stock has a consensus analyst price target of $21.38 and a 52-week trading range of $11.65 to $45.51.

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