Fitbit stock is cratering. Fitbit (FIT) delivered an all-around miss and 2018 outlook that fell well below expectations, and such FitBit stock is plummeting. Revenues of $571 million landed $18 million short of consensus, while adjusted net loss per share of -$0.02 fell two cents below the Street’s estimate. Let us discuss

Units sold did not fall as sharply as they had last quarter: -17% this time vs. -32% in 3Q17.

On profitability, gross margin continued to decline sequentially, now to 44.2% on a non-GAAP basis vs. 45.2% last quarter.

Considering the higher ASP and holiday quarter volumes, we thought this would be much better. Fitbit managed to keep opex under control at 43% of total revenues vs. last year’s much more concerning 50%. A very rich tax rate probably contributed greatly to the earning miss, which might please the more optimistic investor as a large chunk of the bottom-line drag seems to have been unrelated to the company’s core operations.

Looking ahead

We expect our device mix to continue to shift towards smartwatches over the course of the year. We expect to see Fitbit Health Solutions rise as well as and increase in premium subscribers, but this growth will be relatively immaterial to wearable device revenue. We think revenue will be approximately $1.5 billion. With a shift in device mix, and fixed cost deleveraging, there will be a hit gross margins, partially offset by operating efficiencies. We expect operating expenses to move 7-10% lower, to a target of $740-$700 million. Capital expenditures as a percentage of revenue of approximately 3.5% is anticipated. All iin all, we think that FitBit is still in the woods.

Please Like And Share Our Content!