Earnings preview: Can Fitbit maintain its growth in Q2?

Fitbit Inc. (NYSE: FIT) is scheduled to report second quarter 2019 earnings results on Wednesday, July 31, after market close. Analysts estimate a loss of $0.18 per share on revenue of $311.9 million.

Smartwatches and trackers have helped drive Fitbit’s revenue and can be expected to do so in the second quarter. The Fitbit Health Solutions business is also a growth driver and could benefit the company’s topline results for the period.

However, Fitbit faces tough competition in the wearables market particularly from Apple (NYSE: AAPL). Apple, along with Xiaomi and Huawei, have significantly eaten into Fitbit’s market share in wearables. Based on data from Statista, in the first quarter of 2019, Apple held a 35.8% share of worldwide smartwatch unit shipments while Fitbit held 5.5%.

It remains to be seen what Fitbit’s strategy is to face these competitive headwinds and sustain growth in the coming quarters.

In the first quarter of 2019, Fitbit beat revenue forecasts while net loss was narrower than expected. Revenue rose 10% to $272 million, helped by growth in trackers and smartwatches, while adjusted loss was $0.15 per share.

Smartwatch device sales grew 117% year-over-year while tracker device sales increased 17%. The Fitbit Health Solutions business grew 70% while device sales were up 36%. Average selling price decreased 19%.

For the second quarter of 2019, Fitbit has guided for revenue growth of 2-7% year-over-year to a range of $305 million to $320 million. For the full year of 2019, revenues are expected to grow 1-4% to a range of $1.52 billion to $1.58 billion. 

Fitbit’s shares have dropped 13% so far this year and 18% in the past three months. The company has an average price target of $6.25.

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