Fitbit, Inc. (NASDAQ: FIT) shares plunged more than 9 percent on Monday after Morgan Stanley downgraded the stock, citing that new software opportunities will need more time to ramp.
According to CNBC, Morgan Stanley analyst Yuuji Aderson give a new 12-month price target of $4 for Fitbit’s shares, down from the previous price target of $5 per share. It represents about 21 percent downside of its Friday closing price.
"We see more downside to the stock as revenues struggle to stabilize and cash burn resumes," analyst Yuuji Anderson wrote Monday. "We think new smartwatches will be outweighed by declines in legacy products, while software opportunities in health coaching will take time to ramp."
The company’s shares fell as much as 10 percent in the early trading on Monday. Including today’s decline, the stock was down nearly 20 percent this year.
The wearable health-device company has faced increasing competition in the fitness-tracking industry. Apple Inc. (NASDAQ: AAPL)’s watch is taking more market shares in the industry. Other companies like Xiaomi Corp. is providing cheaper wearable devices.
"If demand for new products does not rebound meaningfully, we would expect further downside to our estimates," the analyst added. "Should demand decline faster, we see the stock leaning towards our bear case ($2)."