Cowen Analyst Says It's 'Difficult To Defend' Fitbit Following Dismal Q4 Outlook

Shares of Fitbit Inc FIT are trading nearly 30 percent lower after the company offered a tepid forecast for the fourth quarter and full year.

Cowen slashed its price objective by half from $18 to $9 citing the signs of moderation in the wearables. The firm maintained its Market Perform rating.

Analysts John Kernan and Krista Zuber slashed their sales growth projections for the fiscal year 2017 from 16 percent to 12 percent and sharply reduced their EPS estimates from $1.29 to $0.57 for the same period. The consensus called for an EPS of $1.42. The analyst sees EBIT margin dropping by 11.29 percentage points to 8.8 percent in the fiscal year 2016 and to 8.5 percent in fiscal year 2017.

On top of these, outstanding shares are projected to grow from 245 million in the fiscal year 2016 to 255 million in the fiscal year 2017.

In a note, the brokerage said, “The massive deceleration in Q4 sales (some of which is due to shipment shifts and production constraints) makes 2017 challenging to model given continued expense growth. We are cutting our 2017 Non-GAAP adjusted EPS estimate by 53%.”

Cowen thinks that its earlier view of lofty consensus EPS estimate of $1.42 came true. Though the firm also estimated $1.29 EPS for 2017, the brokerage admitted it missed the volatility in the shipments that had the potentials in translating into sales slowdown.