3 Reasons Why Fitbit Is Trading Down After Blowout Earnings

Wearables maker Fitbit Inc (NYSE: FIT) reported much better-than-expected second-quarter numbers on Wednesday, its first earnings release since it became public. The company reported EPS of $0.21 on revenue $400 million, significantly above EPS of $0.08 on revenue of $319 million that the analysts were expecting.

However, shares of the company plunged heavily during trade on Thursday. Alex Hamilton, SPQR Capital senior analyst, was on CNBC to explain the reasons behind that slump.

Blowout Quarter

"We bought it at the IPO, we bought it into the quarter," Hamilton said. "What else do people want? We had a fantastic quarter by any measures. Sales were blown out, EPS was blown out."

Three Reasons For Down Move

Hamilton was asked if FitBit reported such good numbers, why is its stock moving down. He replied, "Sequential gross margins were down from last year. We were down about 460 basis points for three reasons. One was foreign exchange, two was ramping up production to meet demand. Those were the two main reason there, right?"

He continued, "These are high-class problems and the other one and the other reason -- apparently they all contributed to the quarter equally -- was the fact that they had three new products in the quarter. So, basically they did not get the scale that the Street wanted, but you haven't given this time. Stock has only been public for month and a half."

At time of writing, shares of Fitbit were trading down 11.5 percent.