fitbit stock slump earnings flex 2 charge alta quarter

Over the past week, Fitbit’s (FIT) stock has lost over 30% of it’s value. The plunge happened at the end of last week after the fitness tracker company missed earnings estimates and tempered expectations for the Holidays. In the days since, shares of Fitbit have been unable to bounce back. While only missing estimated revenue by $3 Million, year-over-year income fell by almost 43%. This is despite introducing new models and aligning with both Kohl’s and Vera Wang. Even worse, for the vital Holiday quarter Fitbit is projecting revenue of $725 Million to $750 Million versus expectations of $925 Million. So what exactly is happening with Fitbit and what does this mean for the larger wearable market?  

First off, all is not dire for Fitbit; it is still one of the biggest players in the fitness tracker market and has the largest slice of market share for wearable devices. But the company is finally realizing what we have been discussing since last year on Circuits And Cable Knit – fitness trackers are a commodity product. Over the past 12 months, there has been a race towards the bottom for the devices. Whether it was new, lower priced Chinese devices or stripped down trackers from companies such as Misfit, $10 devices began offering the same basic features as the $150 ones. Assuming an activity tracker’s job is only to track movement and log that information, if both the $10 and $150 device accurately do that what is the value proposition of the premium device. To make matters worse, now that we are on the 2nd and 3rd generation of smartwatches, older models can be picked up for around the same $150 price point. Those wearables offer a vastly deeper experience with apps, notifications, and integration with your phone, in addition to fitness tracking capabilities.

Fitbit seems to be wising up to the commodity issue and is not only improving the design of their devices, but also the connectivity. The company’s 3 new devices – the Flex 2, the Alta, and the Charge 2 – all are capable of connecting to your phone and receiving notifications. The Alta and Charge 2 even have screens large enough to display incoming texts. But all of this might just be too little, too late. As several reviews of the new devices have pointed out, there is just nothing to be excited about with Fitbit’s new lineup. They aren’t offering anything that hasn’t been offered before and a shiner new package can only make the devices so enticing. If you were going to spend $150 on a wearable device, would you be more excited to buy a used Apple Watch or a new Fitbit – and that is Fitbit’s problem.

Speaking of new devices, let’s take a look at the recently announced Flex 2 and Charge 2:

Fitbit Flex 2 wristband bangle pendant

The Flex 2 maintains Fitbit’s original design of a small modular tracker with a few LEDs and can be moved between wristbands. For the Flex 2 the module has gotten slimmer, the bands better looking, and the whole thing is now waterproof. The waterproofing has allowed Fitbit to add swim tracking to the device’s feature-set. In addition to the rubber wristbands, the tracking module can also be placed inside a wrist bangle or worn as a pendant. The Flex 2 can also connect to your phone and will vibrate when you receive notifications. The 5 LEDs on the module will light up differently depending on the type of notification received. The Flex 2 lists for $99.95 and soon will offer accessories from Public School, Vera Wang, and Tory Burch.

Fitbit Charge 2 Wrist Bands

The Charge 2 is a bit more full featured of a device, sporting a tappable OLED display and richer phone integration. Unlike the Flex 2, the Charge 2 can display text from incoming notifications and can pull GPS information from your phone to automatically track runs and workouts. While the Charge 2 has interchangeable bands, it is definitely a sporty device and will not win you any style points. The Charge 2 is also currently Fitbit’s lowest priced device to include a heart rate sensor. But, despite being a fully capable activity tracker, it lacks the waterproofing of the Flex 2 or higher end wearables like the Apple Watch. The Charge 2 lists for $149.95 but some colors sell for less on Amazon.

It will be interesting to see if there is enough innovation at Fitbit to maintain an audience. The next year will be very telling for the company as it faces stiffer competition in a market where very little differentiates one device from another.