Fitbit Inc (FIT): Pacific Crest Cuts Estimates; Sees More Downside Coming Ahead; Here’s Why

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Pacific Crest thinks buy-side expectations are below sell-side and thus remain Sector Weight on the name

Pacific Crest weighed in on Fitbit Inc (NYSE:FIT) early Wednesday and reduced its 2017 EPS, revenue and unit estimates. The firm noted that Fitbit’s inventory remains well above estimated levels at nearly eighteen days. Consequently, the firm has maintained a Sector Weight rating on Fitbit stock as it sees risk to first quarter estimates of the company. Following the research note, Fitbit shares were trading modestly down on Wednesday trading session to close down 1.08% at $7.36, near its 52-week low price $7.30.

Brad Erickson of Pacific Crest carried out channel checks in the United States that indicated “days of inventory have continued higher exiting the quarter, introducing risk to Q1 Street estimates.” The analyst highlighted that Alta and Blaze sales volumes were held up modestly better than targeted, but he believes “Charge 2 inventory is particularly bloated in certain parts of the country and Flex 2 demand has proven disappointing throughout.”

As a result of channel checks, Mr. Erickson has reduced 2017 estimates. The firm now sees modeling units to decline 45% quarter over quarter versus prior expectation of 41% decline. It also expects units to decline in 2017 by 15% versus the previous estimate of 7% decline. “Our estimates are considerably below the Street for next year, but we believe we buy-side expectations are also well below sell-side,” added Mr. Erickson.

Pacific Crest has reduced the company’s 2017 revenue estimate from $2.193 billion to $1.998 billion and EPS estimate from $0.25 to $0.01 EPS. In contrast, the Street anticipates 2017 revenue to clock in at $2.440 billion on $0.65 EPS.

The fitness device maker has a total market capitalization of $1.64 billion. The stock price has a 52-week high of $30.96 and 52-week low of $7.30.

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