Fitbit Inc (NYSE: FIT) stock is having a roller-coaster week after the company announced the departure of CFO William Zerella. The stock price dropped before rebounding by the market’s close on Wednesday, but analysts say the management change does little to improve the company’s outlook.
Zerella is reportedly leaving Fitbit after four years to join an autonomous vehicle technology startup. Fitbit’s chief accounting officer Ron Kisling will be taking over as CFO, and Wedbush analyst Alicia Reese says investors should expect a smooth transition.
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“We do not expect Fitbit CFO Bill Zarella’s departure to create waves,” Reese says, according to Reuters.
FIT stock has been on fire as of late, gaining more than 30 percent in the past month on optimism related to stronger-than-expected sales of the company’s Versa smart watches. However, Reese says the fact that Fitbit reaffirmed its lackluster full-year guidance just last month is a troubling sign.
“Maintained guidance implies that Versa may be cannibalizing Ionic, along with continued declines in fitness trackers offsetting any strength from Versa,” Reese says.
Fitbit stock is down roughly 67 percent from its 2015 initial public offering price as the company has struggled to keep pace in the wearable device market with Apple ( AAPL) and other deep-pocket competitors. In the most recent quarter, Fitbit reported a 17 percent decline in revenue and a $41 million net loss.
Bank of America analyst Ryan Goodman says Fitbit may have some positive near-term momentum with the Versa, but the company has still not demonstrated a clear long-term path to profitability. Goodman says Wednesday’s management shuffle doesn’t help.
“Mr. Zerella’s decision to leave to be CFO of an autonomous vehicle technology startup could be construed as a blemish in long-term strategic confidence,” Goodman says.
Goodman says the big question for Fitbit investors will be whether or not the Versa momentum carries over to the second half of 2018 and can offset a decline in the fitness tracker market.
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“Valuation reflects a discount to peers, but we believe a re-rating would require a clearer path to [earnings before interest, taxes, depreciation and amortization] profitability, abatement of free cash flow burn and product cycle confidence,” he says.
Bank of America has an “underperform” rating and $4.80 price target for Fitbit. Wedbush has a “neutral” rating and $6 target for FIT stock.
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Fitbit Inc (FIT) Has a New CFO, But the Same Problems originally appeared on usnews.com
