Something unhealthy may be going on at Fitbit (FIT), at least according to its withered stock price.
On Monday, shares of the maker of fitness devices plunged below their IPO price. While the stock recovered slightly on Tuesday, the stock remained below its $20 initial stock offering price in June. Since the last trading day of 2015, Fitbit has shed one-third of its value.
It's quite a turnaround from just a month earlier, when Fitbit was predicted to benefit from holiday buying and New Year's resolutions as consumers purchased its devices to give as gifts as well as track their own activity and get fitter. At the time, those expectations prompted Barclays to predict that the company would see "meaningful sales" over the holiday weeks. So how did Fitbit's retailing muscle turn into flab?
Blame two recent developments: allegations that Fitbit's devices don't accurately track heart rates, topped off by an underwhelming reception at CES, the annual tech trade show where companies unveil their latest and flashiest devices and innovations.
Fitbit users sued earlier this month in a class-action lawsuit that alleges the Fitbit Charge HR and Surge models don't accurately track heart rates. Whatever the outcome of the lawsuit, the allegations alone are damaging Fitbit's reputation, given that consumers are shelling out between $150 to $250 precisely because they want their devices to provide accurate feedback.
While that was bad enough, Fitbit found a cool reception at CES when it unveiled its newest device, a $200 smartwatch called the Fitbit Blaze. One of its problems, according to analysts, is that the Blaze doesn't allow for third-party apps, which may mean it will prove less appealing than the Apple Watch, given the robust number of apps available for the latter from companies including fitness tracker Strava and ride-service Uber.
The Blaze "was panned by many for its design and potentially greater competition with Apple Watch," R.W. Baird analyst William Power wrote in a research report on Monday. "Whether the Blaze succeeds or not, and the market is already expecting the worst, we expect Fitbit to launch additional upgrades over the course of the year."
Power lowered his price target for Fitbit from $54 to $30, citing the questions over Fitbit's Blaze.
Still, Power maintained that the company could benefit long-term from continuing demand for digital health devices, which could elicit a premium for its shares.
Fitbit's also facing increasing competition, with Under Armour (UA) unveiling a new line of connected devices at CES. Still, Power said Under Armour's first fitness band "didn't overwhelm."
In the meantime, however, Fitbit will have some work ahead of it to shake off its winter doldrums.