Fitbit (FIT) Stock Price Tanks over Plans to Sell Additional Shares

Fitbit crushed expectations for third-quarter earnings.

Fitbit (FIT) announced its quarterly earnings results on Monday, Nov-2-2015.

Geographically, revenues from the United States accounted for 66% of the third-quarter revenues, 16% was contributed by Asia-Pacific, 12% came from EMEA, and 6% from the Americas excluding the U.S. Fitbit now has an average rating of “Buy” and an average price target of $50.97. Aseparate regulatory filing Monday showed that Fitbitproposed to sell 7 million shares, while certain shareholders proposedto sell 14 million.

The company sold 4.8 million connected health and fitness devices in the reported quarter.

Thus far, Apple remains mum on how many smartwatches it has sold, but Fitbit’s CEO said today (Nov. 2) that the Apple Watch hasn’t made a dent on sales of its fitness trackers.

Zerella says that investors should look at how the stock has traded since its IPO (it’s up more than 40%) and let the numbers from the quarter speak for themselves. The firm believes that the stock offering will cause a near term volatility but expects continued upside in the long run, given strong checks, margin flow and corporate wellness traction. Analysts on average had expected 10 cents, according to data compiled by Bloomberg. Over the last four months, 20 companies were added under the program, the most notable being Target and Barclays. The low end of this is higher than a Street prediction of $589.72 million. Revenue jumped to $409.3 million from $152.9 million.

It provided guidance for full-year revenues in the range of $1.77 to $1.80 billion.

Several analysts have commented on the company rating.

Fitbit posted solid third-quarter results with both the top line and the bottom line exceeding the respective Zacks Consensus Estimates. But growth prospects outside the US are even stronger. It appears that this is part of Fitbit’s ongoing strategy as evidenced by the company’s software enhancements which are created to mesh with other cultures and regions including integration of Baidu’s maps for China. Target Corp (TGT.N) has also said it plans to make Fitbit devices available to employees. Finally, Robert W. Baird initiated coverage on shares of Fitbit in a report on Tuesday, July 7th. The firm’s revenue saw a rise of 168% on YoY basis.

Unless dilution gets out of control down the road, and until sales growth starts to wane substantially, I think Fitbit stock is still a compelling buy – especially on the dip.