Fitbit, Inc. (NYSE: FIT) is a pioneering developer of wearable fitness-tracking devices. When the company went public to great fanfare on June 17, 2015, the stock jumped nearly 50% from its public offering price of $20. It reached its high point in August, rising above $51 per share. However, despite the company's strong operating results since the initial public offering, Fitbit has continued on a long downward trajectory since that August high. In February 2018, Fitbit fell below $5 for the first time. At the day's close on Feb. 26, 2018, the stock was trading at $5.56, though it plunged in after market trading. As of June 11, 2018, stock is trading close to $7.37 per share. 

Operating History

Fitbit began operations in 2007. As a first mover in the wearables market, the Fitbit brand quickly became synonymous with fitness tracking. By 2012, Fitbit device sales had broken through the 1 million mark as momentum continued building across the market. Fitbit sold 4.5 million devices in 2013 and 10.9 million in 2014, the year prior to its IPO. In 2014, Fitbit enjoyed a worldwide market share of 41% on the year, with sales of more than $745 million and net income of nearly $132 million.

Lead Up to the IPO

Fitbit sold 3.9 million devices during the first quarter of 2015, an increase of 129.4% over the same period in 2014. However, despite the furious growth in sales, Fitbit's market share fell by nearly one-fourth, from 44.7% in the first quarter of 2014 to 34.2% in 2015. Fitbit faced competition from all directions, including low- and mid-priced fitness wearables from companies such as Jawbone and Xiaomi, as well as offerings in the middle- and high-end fitness segments from sports and technology giants such as Nike, Garmin, Microsoft and Samsung.

In the second quarter of 2015, Fitbit sold 4.4 million units, up 158.8% from the previous year. While its market share was down by about one-fifth compared to the same period in 2014, Fitbit maintained its dominant position in the market. Apple entered the wearables market during the second quarter with its high-end, all-purpose watch that garnered a lot of excitement and sales but did not seem to disrupt Fitbit's fitness-focused segment of the market.

The IPO and After

Fitbit's IPO in June was met with excitement right out of the gate given the company's competitive position and fast sales growth in a booming market. After rising nearly 50% during the opening day of trading, the stock continued trending up until second-quarter 2015 earnings were reported on Aug 5, 2015. Despite announcing quarterly revenue of $400 million, far beyond analyst estimates of $319 million, Fitbit's share price tumbled, soon settling below the $40 mark. Concerns seemed to be linked to a rather small decline in gross margins from 52 to 47% as the company struggled to pump out 4.4 million devices to a hungry market.

Fitbit shares hovered below $40 during the third quarter of 2015. In November, the company announced another round of strong results, including sales of 4.7 million devices, an increase of 101.7% over its 2014 third-quarter results. Revenue was $409 million and gross margins were in line with second-quarter results. However, the company also announced plans for a secondary offering of 7 million shares, as well as additional sales by existing shareholders. The share price declined more than 8% after the news. Although the secondary offering was eventually amended to 3 million shares, investors were clearly worried about Fitbit's quick return to the markets for additional working capital.

Fitbit problems continued into the new year. On Jan. 5, 2016, Fitbit unveiled a new smartwatch product, called the Fitbit Blaze, which presumably would compete against the Apple Watch and other similar offerings. The Blaze was met with some skepticism from investors, and Fitbit's share price fell nearly 20% on the day. The hits kept coming. On Jan. 7, 2016, news emerged of a class action lawsuit against Fitbit claiming the company's devices are inaccurate, particularly in the monitoring of heart rate. The following week, doubts mounted further as to the viability of the Fitbit Blaze when William Power, a prominent analyst for R.W. Baird, lowered his price target for Fitbit from $54 to $30 based on concerns about the Blaze and other product developments. This precipitated a further slide for Fitbit to a level below its initial $20 offer price.

In 2017, things didn't pick up for Fitbit, with the company never managing to get its stock price above $10 for the entirety of the year. Fitbit's financial problems led to another drop in February of 2018 after the company's dismal its Q4 2017 results. The company sold 15.3 million devices in 2017, but it wasn't enough to turn the tide of bad news for the company. During Fitbit's earnings report, CEO James Park said that the company would spend 2018 trying to manage down expenses. A Citron Research report estimates that Fitbit shares will hit $15 this year, a 130% upside.