Shares of Fitbit Inc. have fallen to a new low amid a weeklong slide that started when the company's new "fitness watch" failed to impress at last week's Consumer Electronics Show in Las Vegas.
The wearable fitness company's stock fell more than 12 per cent to $18.85 (U.S.) on Monday, down nearly 37 per cent over the last five days, and below its June, 2015 IPO price of $20.
Fitbit CEO and co-founder James Park defended the company's new devices in an interview at CES last week, arguing that its financial performance is strong and customer demand is high. "I would say that the Wall Street investor and our customers are not the same audience," he said.
The trouble started ahead of CES 2016, when Fitbit showed off a new product called the Blaze at a Jan. 5 news conference in Las Vegas. While the Blaze will connect to smartphones and serve up calendar notifications and other alerts, it's not an app-centric smartwatch like Apple Watch, Android Wear devices or even the Pebble watch.
Critics panned the $199 device as too expensive for something that is not a full smartwatch. Sterne Agee analyst Rob Cihra called it "a not-so-smart watch with limited apps."
The day of the announcement, shares dropped 18 per cent and were down 27 per cent by the end of the week.
Mr. Parks said the decision to update Fitbit's product lineup, which includes eight versions of its fitness trackers, with something less ambitious than the Apple Watch was deliberate. "We took a very different approach. The common knocks against smartwatches today is they do too much, it's overwhelming."
Analysts questioned the strategy.
"There are 10,000 apps on the Apple watch, yet Fitbit counters that most folks use just three on average," wrote RBC analyst Mark Sue. He also pointed to the increased competition in Fitbit's category: "We are not necessarily worried about the Garmin and Jawbones of the world, but large companies ranging from Samsung, Under Armour, Huawei, etc. are persistently trying to break into the market."
For a device intended to be more fashionable than Fitbit's usual rubberized fare – the Blaze features a removable core so users can customize the colour of the metal frame, as well as a variety of band choices – some reviewers labelled it ugly and clunky.
Leerink Research issued a weekend note on Fitbit in which one analyst "sees the Blaze as a strategic misstep and style miss with poor sales prospects, particularly in the first quarter as Apple Watch 2 looms."
"You can't please everybody when it comes to design," Mr. Park said. "If you read the early Apple Watch commentaries, 'it's too bubbly!'"
Mr. Park said he was not concerned about the company's valuation, and cited a generally tough climate for tech companies (last week, Apple shares fell below $100 for the first time since 2014 ).
Market research company IDC's most recent quarterly tracking report still had Fitbit as the No. 1 wearable tech company by shipments, with 22 per cent, but the expectation is that Apple, with 19 per cent, may soon surpass it.
"One of the biggest competitive advantages is we have a huge community of users," Mr. Park said. "As of Q3 last year, we've shipped over 30 million devices – it's a huge user base and that exhibits a lot of network effects. People buy Fitbit not only for hardware, but because they want to compete with their friends and family." Fitbit's app allow users to opt in to have their activity logs monitored by other users.
Even if Fitbit is not playing in the smartwatch category, analysts at Gartner have estimated that 70 million fitness trackers were sold in 2015, a number that could zip up to 500 million units a year by 2020, or 49-per-cent compounded annual growth worldwide.
Mr. Park also noted the company's first two quarters beat analyst expectations and the company raised its guidance. Fitbit's last quarterly earnings in November showed revenue of $409-million, up 168 per cent year-over-year, and earnings per share of 19 cents.
He sees Fitbit's North American penetration as still pretty low, but said that overseas growth was even stronger, up 300 per cent year-over-year in the Africa-Middle East and Asia Pacific regions.
The Blaze goes on sale in March at 48,000 retail locations worldwide. In Canada, it will be priced at about $250 (Canadian), with additional accessories (extra bands or frames) ranging from $40 to $180.