Stock analysis: Fitbit

FITBIT was trending $5.5 to $6.5 before Q1 2019. On 1st May, Earning report, it beat the analyst's earning estimate in revenues and hardly met earnings. It is not bad but positive considering it met or surpassed revenue. Fitbit sold off to $4.32 and now coming back. Fitbit leadership has similar problem to Steemit's leadership. Both had big success at initiation and are struggling despite significant progress in developments and R&D. Here is my analysis in the stock. Initially, I wrote in Yahoo conversation section, but I think it would be useful too to post in a blockchain.

1. Fitbit spent $332.169M in R&D and showed $188,543M in net loss. Let's cut $200M in R&D, shows $21.46M in net profit. EPS will become positive. FITBIT is not losing money, it is growing due to R&D, Q after Q. AMZN has negative earnings for years, since it was expanding showing net loss.

2. Cash in hands mean something. It means it can take further risk through R&D, innovation and expansion in new sectors. $600M as cash, plus net fungible assets $500M, and 12 years of health data and patents $1B. The valuation can be easily at $2.1B.

3. Negative EPS is an accounting problem. For most of the growth company they stays negative for years. If they want to show positive EPS, the growth will be de-accelerated (cost cut from R&D, expansion etc.)

4. Fitbit is not fighting with Apple. Apple has its own cult. Personally, I hate Apple products. I can buy an Iconic $150 vs $400 Apple watch and I know how to make more use of it than any Apple watch. FItbit and Apple are fighting for different segments and taste. Now if they launch a subscription, people will trust them due to their expertise on health data and hardware. Can Itune movies compete with Netflix? They are totally two different beast. Do a rough estimate 5M users x $8 per month x 12 months=$480M revenue stream.

5. Then why is stock going down. It is due to technical analysis. For the last six months, trend is negative. Short term traders are selling due to apparent loss cutting. Long term retail traders selling in fear. Some big hedge fund holders are cutting positions who are mostly based on TAs. Who are buying: HODLers, making their buying average lower, some hedge funds and speculators. The stock is oversold, RSI is historically at one of the lowest. Selling is getting de-accelerated. Within a few days, buying will earn momentum. Use RSI and Oscillator Accelerator indicator in Tradingview for 1D chart to see the trend reversal.

6. Market cycles: Most traders will see the signals and buy the stock (i.e. they follows TA). It always ends in FOMOing at clear signals. Then pros will sell at the peak of FOMO. Right now, TA and momentum is against the FA, therefore, big players will accumulate on FA and will sell on FOMOs. Stocks are changing hands from retail to institutes. Retail traders will lose hope and FOMOing out at close to $4. Then eventually, news will be released on new services (e.g. big subscription model). Before, even the next sale report, stock will see big greens. Who sold above $5.5 to $6.9, before the trend reversal. Who is buying now? In short term, buying above $5 was a mistake and probably selling below $4.25 due to fear on TA basis. On slight of signal change, a big buyer will buy from $4.5 to $4.9 to change the shape of TA and momentum. Retail will jump in due to TA and momentum reversal. Who bought from $5 to $4 those big buyers. Rinse and repeat. It is just an opinion not a statement.

Peace
@riseofth
Crypto-trader and miner since 2013