Fitbit Q3 revenue stands at $393 million posting a $113 million loss for the company but exceeded Wall Streets expectations. Fitbit’s two new products the Ionic and the Alta HR helped the company move 3.6 million devices of shelves. This is up 7% from Q2, accounting for a third of revenue for the company. Of course, the Ionic was only released a month ago and with the holiday season a stone’s throw away, it be hard to gauge profit for the year. The real test will come in Q4. It is expected that revenue would range between $570 million to $600 million in the final quarter. Fitbit itself forecasts revenue of $1,615 billion to $1,645 billion for the year.
Its weak sales aren’t unexpected. With the Apple’s Series 3 watch, Xiaomi taking over the lower end market and Garmin nipping at its heels. Its revenue for the first three quarters is down 34% for the same period in 2016. Fitbit’s share price has also taken a beating, with a 15% decline since the start of the year. Fitbit is no longer the dominant force it once was in the wearables market and has been steadily losing market share. It failed to capitalize early on by failing to come out with products consumers wanted after they got bored with its initial offerings. Their designs weren’t eye-catching. It didn’t create a smartwatch earlier. It didn’t define itself.
You want the “best smartwatch” = Apple, the “best sports watch” = Garmin, the “basics” = Xiaomi. It’s CEO James Park, on the other hand, is optimistic though and adds that his company is on a path back to growth and profitability.
The Ionic is crucial to Fitbit. It accounts for 50% of all smartwatches purchase from Amazon US. The US market is still Fitbit’s biggest market. The Ionic is a gateway device for Fitbit. It allows the company to get its foot in the door to a more lucrative consumer segment; E-health. Fitbit also launched a companion wireless Bluetooth headset at the same time, the Fitbit Flyer as 64% of consumers listen to music during workouts, with 14% of its Ionic users also purchasing the Flyer. Fitbit also added a Wi-Fi smart scale, the Aria 2 to tie its products offering together.
The company believes that conditions such as diabetes, sleep disorders and mental health which are impacting millions of people can be negated by regular exercise, physical activity, a reduction in stress levels, improved sleep quality, and diet management. With its devices playing a role in health management. Fitbit has also made several partnerships to extend its reach into the healthcare ecosystem. With the company being 1 of 9 selected by the FDA to participate in a program meant to speed up the development of digital therapeutics and new digital health applications. Which is expected unlock revenue streams for Fitbit. Of course, Fitbit isn’t the only player eyeballing the E-health space. Apple and Microsoft also have their targets locked. Also, they have a much more significant war chest to play with.
Unless they can knock it out of the park, we see a slow death.