Fitbit (FIT) Stock Goes Down On Charge 2 And Flex 2 Leaks
Zacks Investment Research | Aug 17, 2016 11:35PM ET
Yesterday, Fitbit Inc. (NYSE:FIT) was in focus after a video on TehnoBuffalo revealed its two forthcoming products “Charge 2” and “Flex 2” (as claimed by the website). The website also leaked several images of the new devices.
According to the leak, Fitbit Charge 2 is an upgrade to Fitbit Charge. It will feature the new “PurePulse” heart-rate tracking technology and support all-day sleep and activity tracking, multi-sport tracking, and interchangeable bands. It will have a screen larger than that of the current model.
Fitbit Flex 2, the successor to the original Flex, will be “swim proof,” also supporting all-day sleep and activity tracking. However, it will not have a large screen.
Its shares were down 4% in Wednesday’s trading. The price movement after the video release reflected negative investor sentiment.
Let’s see what may have resulted in it:
Lack of Clarity on the Products
Though it’s just a rumor, it must have played on investors’ mind. They are still speculating about the company’s pipeline and thus waiting for an official confirmation.
Simple Upgrades with no Innovation
The leaked video doesn’t seem to create any excitement among the investor community. To some market watchers, the products appear to be moderate upgrades of popular models and lack innovation. So there is a feeling that they may not encourage users to upgrade.
Some Fundamental Issues
Fitbit has had issues with product quality in the past that have materially impacted its results. Users have reported skin irritation and even sued the company on such grounds. The company told the Consumer Product Safety Commission that it had heard of 9,900 cases of irritation caused by allergic contact dermatitis. Fitbit acknowledged that users have reported skin irritation from its Fitbit Charge, Fitbit Charge HR and Fitbit Surge devices. The company has survived these instances but its streak of “good luck” can change any time. Therefore, investors remain wary.
Additionally, the company's disappointing historical stock performance and unimpressive growth in net income remain concerns.
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