Fitbit is pinning its turnaround hopes on its smartwatch for the masses

pulse

May 3, 2018 5:15 PM

Fitbit's Versa smartwatch showed strong initial performance, inspiring hope in DA Davidson. While the company posted another quarter of losses, reeling from high competition in the smartwatch market, this may be a sign that this struggling company is turning itself around.

The first-quarter marked Fitbit's sixth straight quarterly loss.

Fitbit posted another loss on Wednesday. Still, the quarter showed some improvement, and some see this as an indicator the company may be on its way to recovery. Shares fell as much as 10% Thursday.

The company's new Versa smartwatch in particular looked promising, at least based on initial sales. The company, best known for their activity trackers, has struggled with sales and profitability in the past, posting its sixth straight quarterly loss as a result of high competition in the smartwatch market and a shift in demand away from basic fitness trackers.

The Versa smartwatch can serve as a catalyst for shares, DA Davidson analyst Tom Forte wrote in a note. He also suggested that if its strong performance continued, he may consider upgrading Fitbit to "buy" from his current "neutral" rating.

Fitbit is also implementing a new strategy to increase revenue by expanding its offerings to data services, shifting dependency away from weak wearable sales. The company announced Monday that it would partner with Google to explore patterns in health data with greater accuracy. While Forte ultimately approves of the strategy, he estimates the business model transition will likely take years rather than quarters and that sales will continue to contract during this period.

Shares are down almost 14% this year.

pulse