Fitness device maker Fitbit is predicting that its key-holiday shopping quarter will fall well below of analysts’ estimates, hurt by soft demand and production issues related to its new Flex 2 wristband.
Shares of the company, which also reported lower-than-expected quarterly revenue, immediately plummeted by a third and were set to hit record-low levels on Thursday.
Fitbit forecast revenue of $725 million to $750 million for the October-December quarter, while the cocaine nose-jobs of Wall Street thought that $985.1 million was more reasonable.
This implied revenue growth of 5.4 percent at the top end. Analysts were expecting growth to pick up to 38.4 percent from the 23.1 percent in the latest third quarter, which is the smallest rise since the company went public in June 2015.
Chief Executive James Park said the outfit was growing and was profitable, just not at the level that people expected.
Fitbit’s transition to its newer products, greater-than-anticipated softness in the wearables market and production issues with the new Flex 2 wristband were the chief causes for the weak outlook, Chief Financial Officer Bill Zerella said.
The production issue – Fitbit found it “incredibly difficult” to find small-enough batteries to fit – started in the third quarter and is not expected to be resolved before the end of December, Zerella said. He estimated that hit Fitbit’s revenue forecast by about $50 million.
Fitbit, which launched two new fitness wristbands, Charge 2 and Flex 2, in late August, said it sold 5.3 million devices in the quarter, edging past analysts average estimates of 5 million, according to research firm FactSet StreetAccount.
However, the average selling price for its devices fell to $93 from $99 in the prior quarter, and missed analysts’ average estimate of $98.25. All this meant that Fitbit’s total revenue of $503.8 million missed analysts’ average estimate of $506.9 million.
It was also not particularly popular in the Asia Pacific market where it fell 45.1 percent to $35.7 million.
Operating expenses jumped 52.4 percent, largely due to higher research and development costs. The company’s net income plunged about 75 percent to $26.1 million.