Fitbit Inc (NYSE:FIT) is anticipated to report earnings on February 27th. Yet, Wedbush analyst Nick McKay is firmly rooted on the sidelines after fourth-quarter in-store checks have left him disappointed in the fitness tracking giant’s demand trends this holiday season.
To put it simply, McKay takes a swipe at the giant, declaring, “‘Twas the night before Christmas, and we expected more creatures to be stirring in the Fitbit aisle.” In reaction, the analyst reiterates a Neutral rating on shares of FIT while cutting the price target from $10 to $8.50, which represents a 14% increase from where the stock is currently trading.
McKay opines, “We are unwilling to recommend Fitbit shares as we believe that it is more prudent to take a wait-and-see approach to Q4 results, FY:17 guidance, and long-term demand trends. Although our Q4 online checks indicated some positive trends, our in-store checks were underwhelming.”
This is a particularly bitter revelation from the analyst’s eyes, considering in-store checks throughout the period between Black Friday and Christmas had signaled “supply outpaced demand by a wide margin.” What happened? As it turns out, there was a lot less foot traffic than McKay had been expecting, and moreover, “we did not see significantly reduced inventory positions after each holiday.”
However, the analyst’s online checks revealed far better results, with the Charge 2 continuing to reign the best sellers lists of Amazon in both the U.S. and the U.K. as well as Best Buy.
Overall, “With shares trading near their all-time low, holiday demand concerns appear to be largely priced in. If Fitbit is able to deliver Q4 sell-in within its guidance and provide FY:17 guidance at or above the Street’s expectations, a short squeeze could ensue. We see the potential for further downside, however, if results or guidance miss the mark, and we remain unconvinced that the company’s long-term trajectory has improved based upon our in-store checks,” McKay concludes.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Nick McKay is ranked #4,224 out of 4,342 analysts. Nick McKay has an 11% success rate and faces a loss of 31.6% in his annual returns. When suggesting FIT, McKay forfeits 37.7% in average profits on the stock.
TipRanks analytics exhibit FIT as a Hold. Out of 21 analysts polled by TipRanks in the last 3 months, 2 are bullish on Fitbit stock, 18 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 30%, the stock’s consensus target price stands at $9.69.