Fitbit (FIT) - Get Report has a popular app, and its share price has lost nearly 75% of its value in 2016.

But don't grab the stock on the dip. 

The company's sales have slowed even as its costs have risen. Moreover, it faces intense competition in the fitness wearables space. Production problems with its Flex 2 watch didn't help Fitbit's cause; nor has the slowdown in China's economy. Meanwhile, Fitbit's app may not be generating as much deep-rooted, long-term enthusiasm as it might seem.

Deutsche Bank analysts are among those taking a "wait-and-watch approach" to Fitbit and the wearables market. In cutting their price target on the stock to a meager $9 earlier this month, analysts cited "waning" demand for wearables.

Fitbit shares fell slightly in Thursday trading to just under $7.50 a share. 

The end effect: The company will have to provide concrete evidence that its earnings will improve for investors to consider adding the stock to their portfolios. 

Fitbit has struggled to keep pace with Xiaomi, which has grabbed a huge share of the budget fitness wearables market, Garmin and Apple. The Apple watch owns a sizable portion of the higher-end wearables market. Fitbit revenues of $504 million missed analysts' expectations of $507 million. 

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To be sure, the Fitbit app ranks second globally behind Nintendo's Super Mario Run. It ranks ahead of Snapchat, Alphabet's YouTube, Facebook's Instagram, and Amazon's Alexa in Apple's app store. The free Fitbit app is designed to work with activity trackers and smart scales it produces.

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But the app's ranking may be misleading.

Competing products like the Apple Watch app come pre-installed on iPhones

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Fitbit has tried to adjust to the changing times. The company has a partnership with Medtronic and announced a deal to acquire certain Pebble assets.

Institutional partnerships are important. Aetna is giving some of its 23 million customers discounts on Apple smartwatches. It will also make the smartwatches available to its 50,000  employees at no cost. 

While third quarter earnings were disappointing, Fitbit's fourth quarter guidance of between $725 million and $750 million was a bigger dampener, falling far under the consensus $985 million.

Management's low expectations could be the result of disappointing Charge 2 sales. The Charge 2, which has a five-day battery life, can track the effects of multiple activities and sends reminders for users to move, was supposed to be Fitbit's flagship holiday product. Fitbit's Blaze fitness band was not a big hit.

For Fitbit stock to rebound, the company must show that fourth quarter sales will improve over the projections. Until then, buyer beware.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.