Friday, September 30, 2016

Fitbit Inc (FIT) Charge 2 Demand Is Below Expectations

It's probably too early to tell how good the Charge 2 actually is...

Shares of Fitbit Inc (NYSE:FIT) have been floundering this week, down over 11%. Management had been hoping for a continuation of the surge that’s been pushing Fitbit stock higher over the past three months. Expectations were that the official release of the Charge 2 tracking band would aid the rally.

Unfortunately for Fitbit stock, the release of the Charge 2 did not cause massive stampedes at local electronics retailers, nor generate anything worth reporting on the nightly news.

Instead, since Thursday’s opening bell, shares of FIT have given back a rather sizable portion of the 37% gains that Fitbit stock has earned over the past three months. Some investors are concerned that shares will continue to decline if the Charge 2 doesn’t start selling.

Is Something Wrong With the Charge 2?

Technically speaking, no, there’s nothing blatantly wrong with the Fitbit Charge 2. Since the release of the Fitbit Charge in 2014, management has garnered an overwhelming abundance of user feedback and technical data that developers could use to enhance and improve the next iteration of the company’s popular fitness tracking wearable.

However, opinions and experiences vary widely, especially when it comes to electronics, and the Charge 2 is no exception.

Some users, like Gizmodo’s Christina Warren, have called it “the best fitness tracker, period,” while others, like The Verge’s Lauren Goode, have described the Charge 2 as “a promising fitness tracker, plagued by bugs.”

Again, with a near-infinite number of possible experiences and testing scenarios, and also considering that we’re talking about a wristwatch-sized computer that’s designed to track, measure and record the wearer’s heartbeat, precise GPS location, number of steps taken, distance traveled and even sleeping patterns, it’s not surprising to hear widely different feedback from early users.

Add to that the ability to display smartphone notifications, incoming calls and calendar event alerts, and you’re bound to run into a mountain of unexpected device behavior and even failure.

Looking at the bigger picture, though, despite mixed reviews and reports of non-working functions, it seems as if the Charge 2 has been able to deliver on most of the company’s promises.

What This Means for Fitbit Stock

With the release of almost every brand-new gadget, there’s an expected “breaking in” period where early users report a high number of errors and non-functional features. That’s because development teams have a limited number of testing environments within which they can create worst-case scenarios to measure and improve a device’s performance.

However, real-life usage is almost never the same as laboratory testing, and given the sheer number of consumers wearing a Fitbit device, it would be impossible for the company to predict or plan for every hypothetical incident.

That being said, despite some early reviews stating the Charge 2 is a flop, it would be foolish for investors to act on a small number of early, possibly unsubstantiated claims against the new FIT tracker.

But, if widespread feedback about the Charge 2 continues to be predominantly negative, closing your position in Fitbit stock at that point might not be impulsive or unwarranted.

Quarterly sales figures for the Charge 2 may also play a crucial role in the future of Fitbit stock. It might be prudent to hold off on any major position changes until nearer the next FIT quarterly earnings report.

Article originally appeared on InvestorPlace (09/30/2016)

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