The leader of health wearable industry, Fitbit (NYSE: FIT) finally got positive reaction from the market. Stock price went up from $13 to $15 after it posted a surprising Q2 earning result. For this year, Fitbit did maintain a strong sales and control of expense. However, the guidance gets lower and lower again push the investors to highly doubt the future of the company. Q2 could be a turning point for Fitbit since the strong sales this quarter could erase the concerns from investors.
Over all, Fitbit reported net income of $6.3 million, or 3 cents a share after the payout of preferred dividends, compared with $17.7 million, or 7 cents a share, a year earlier. Sales surged to $586.5 million from $400.4 million a year earlier, as the company sold 5.7 million fitness-tracking devices, just short of analysts’ forecast of six million, according to FactSet.
Gross profit margin narrowed to 41.8% from 46.8% a year earlier.
For the current quarter, Fitbit projected adjusted earnings of 17 cents to 19 cents a share on $490 million to $510 million in sales, compared with analysts’ estimate of 17 cents a share in earnings on $498.5 million in sales.
Sales at Fitbit Inc., best known for its fitness-tracking wristbands, continued to surge in the latest period, although profit plunged as operating expenses more than doubled on continued investments in new products and marketing. The newest products, the Alta fashion-conscious fitness tracker and the Blaze fitness smart watch, accounted for 54% of sales, underscoring the pressure on the company to keep up with technical advances and shifting consumer tastes.
Shares rose 5.3% to $13.86 in after-hours trading on the better-than-expected results. They remain far below the $29.68 closing price on Fitbit’s first day of trading in June 2015. The San Francisco company’s trackers have proven popular, but its stock has stumbled on concerns over the company’s long-term outlook.
In an interview, Chief Executive James Park said the higher spending is aimed at new products for next year. At the same time, he said the company plans more new products for this holiday season than it has for previous holiday seasons. Mr. Park said Fitbit also has increased sales and marketing expenses in overseas markets where it hopes to expand.
It is true the market in US is quite saturated. The sales inside US barely have the space to grow. Besides, competition from Apple Watch and other wearable products just make it more difficult for Fitbit to make sufficient profits. For Fitbit, expanding the oversea market and strengthen its R&D advantage should be on the top of the table.