Fitbit Inc (NYSE:FIT),  the leader in the connected health and fitness market, reported revenue of $505.4 million, GAAP diluted net income per share of $0.05, non-GAAP diluted net income per share of $0.10, and adjusted EBITDA of $45.1 million, for its first quarter of 2016.

“The strong growth and defensibility of our business continues to be powered by product innovation, the network effects of our community, our expanding global distribution, and investment in our brand,” said James Park, Fitbit co-founder and CEO. “Based on the first quarter’s performance and momentum, we are confident about the remainder of the year, which is reflected in our increased guidance.”

First Quarter 2016 Financial Summary

First Quarter 2016 Financial Highlights

  • Sold 4.8 million connected health and fitness devices
  • Q116 revenue increased 50% year-over-year
  • U.S. comprised 70% of Q116 revenue; EMEA 15%, APAC 11%, and Other Americas 4%
  • U.S. revenue grew 33% year-over-year; EMEA 113%, APAC 142%, and Other Americas 74%
  • New products, Fitbit BlazeTM and AltaTM comprised 47% of Q116 revenue
  • Non-GAAP operating expenses comprised 39.3% of revenue in Q116, compared to 22.3% in Q115 and 32.2% in Q415, predominantly reflecting increased investment in R&D and marketing to drive innovation and growth

First Quarter 2016 and Recent Fitbit Operational Highlights

  • Successful launch of Fitbit Blaze and Alta, selling a million units each in the latter part of the quarter
  • Approximately 40% of Fitbit Blaze and Alta user activations were by users who had prior Fitbit devices; and approximately 20% of those were buyers who re-activated, coming back to the Fitbit community after having been inactive for 90 days or more
  • Vast majority of Fitbit Blaze and Alta buyers bought up from a less expensive prior Fitbit device. Less than 10% bought down
  • Introduction of new accessories strategy with Fitbit Blaze and Alta with strong initial consumer interest
  • Announced our intent to enter into a strategic partnership with Alibaba, largest retailer in the world, to reach millions of Chinese consumers through partnership with Alibaba’s TMall platform
  • R&D headcount grew to 755 in Q116, compared to 295 in Q115, and 624 at year-end 2015

Outlook and Guidance

Full-year and second-quarter 2016 guidance continues to reflect the company’s planned higher investments in research and development to accelerate the pace of innovation to deepen its competitive moat; investments in sales and marketing to drive revenue from new products in 2016; and investments in consumer engagement features to accelerate the network effect of the company’s large user community, to strengthen consumers’ brand preference.

Fitbit’s outlook for the full year of 2016 is as follows:

  • Revenue in the range of $2.5 to $2.6 billion
  • Non-GAAP gross margin in the range of 48.5 to 49.0%
  • Adjusted EBITDA in the range of $430 to $490 million
  • Non-GAAP diluted net income per share in the range of $1.12 to $1.24
  • Non-GAAP diluted share count between 247 and 250 million
  • Stock-based compensation expense in the range of $97 to $106 million
  • Non-GAAP tax rate of approximately 30%

Fitbit’s outlook for the second quarter of 2016 is as follows:

  • Revenue in the range of $565 to $585 million
  • Non-GAAP gross margin of 48.0%
  • Adjusted EBITDA in the range of $37 to $47 million
  • Non-GAAP diluted net income per share in the range of $0.08 to $0.11
  • Non-GAAP diluted share count between 247 and 250 million
  • Stock-based compensation expense in the range of $21 to $23 million
  • Non-GAAP tax rate of approximately 30%. (Original Source)

Shares of Fitbit are down nearly 10% to $15.32 in after-hours trading. FIT has a 1-year high of $51.90 and a 1-year low of $11.91. The stock’s 50-day moving average is $15.86 and its 200-day moving average is $22.27.

On the ratings front, Fitbit as been the subject of a number of recent research reports. In a report released yesterday, Pacific Crest analyst Brad Erickson reiterated a Hold rating on FIT. Separately, on the same day, Longbow Research’s Joe Wittine reiterated a Buy rating on the stock and has a price target of $20.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brad Erickson and Joe Wittine have a total average return of -24.1% and 2.5% respectively. Erickson has a success rate of 30.3% and is ranked #3775 out of 3838 analysts, while Wittine has a success rate of 58.8% and is ranked #1679.

The street is mostly Bullish on FIT stock. Out of 18 analysts who cover the stock, 10 suggest a Buy rating and 8 recommend to Hold the stock. The 12-month average price target assigned to the stock is $26.40, which implies an upside of 55.1% from current levels.

Fitbit, Inc. engages in the development of wearable device which tracks data of an individual’s health. It offers products which can track a person’s activities, such as calories burned, sleep quality, steps, and distance. The data collected allows an individual to monitor their progress towards their own personal goals. The company was founded by Eric N. Friedman & James Park in March, 2007 and is headquartered in San Francisco, CA.