Ever since the iPhone and Android turned smartphones into the greatest consumer electronics market in history and helped send Apple's (AAPL) shares into the stratosphere, investors have been hungry for The Next Big Thing®. Something that, if not on par with smartphones, would still see mass-market uptake and yield many billions in annual sales and profits for the market's top players.
For a while, it looked like tablets fit the bill: Shipments of the portable computers saw massive growth in the first years following the iPad's 2010 launch, and briefly overtook PC shipments. But growth turned negative in late 2014 and has remained that way since, as consumers decide phablets are good enough for many computing tasks and that PCs remain indispensable for others. Research firm IDC estimates 183.4 million tablets will ship this year, down 11.5% annually and a small fraction of the 1.46 billion it smartphones it expects to ship.
As tablets fizzled, many began eying wearables as a big opportunity. Fitness tracker leader Fitbit's (FIT) strong growth in the quarters leading up to and immediately following its June 2015 IPO played a role, as did the hype surrounding the Apple Watch's April 2015 launch.
But the hype began diminishing as sales of both the Apple Watch and rival smartwatches sputtered. And Fitbit's latest results and guidance, released on Wednesday afternoon, might act as the nail in the coffin for hype about wearables, at least until new products and features arrive that fundamentally change how consumers perceive the devices.
Fitbit, estimated by IDC to account for 25.4% of global wearables shipments in Q2, reported Q3 revenue of $503.8 million (up 23% annually) and EPS of $0.19. While the later was in-line, the former missed a $506.9 million consensus analyst estimate. More importantly, the company guided for Q4 revenue of $725 million to $750 million and EPS of $0.14 to $0.18, far below a pre-earnings consensus of $985.1 million and $0.75.