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Fitbit Stock Has a Lot to Prove on Tuesday

There's good news and bad news as Fitbit (NYSE: FIT) gears up to report fresh financials in a couple of days. The good news is that the stock soared 12% the day after it posted better-than-expected results last time out. The bad news is that Fitbit stock has plunged 18% since that initial post-earnings pop nearly three months ago.

The news is naturally worse for those that have held on to shares of the activity-monitoring wearables maker for longer than just the past few months. Fitbit stock has plummeted 90% since peaking two summers ago, shortly after its hyped-up IPO. It's against this problematic backdrop that Fitbit will serve up its second-quarter results after Tuesday's market close. It's safe to say that there isn't a lot of enthusiasm for Fitbit these days.

Image source: Fitbit.

Take you by the wrist

Analysts aren't holding out for much. They see revenue plummeting 42% to $341.6 million.  This should be Fitbit's third straight quarter of posting double-digit declines in year-over-year comparisons. This seems brutal, naturally, but success is relative. The stock initially soared on the heels of its first-quarter results in early May, as its 41% top-line plunge was actually better than the 44% slump that Wall street pros were targeting. 

Wall Street pros are bracing for an adjusted deficit of $0.15 a share in Tuesday afternoon's financial update. It would be Fitbit's third consecutive quarterly loss. Analysts have settled into the midpoints of Fitbit's early May guidance, calling for a loss per share of $0.15 to $0.17 on $330 million to $350 million in revenue.

Cleveland Research analyst Ben Bollin lowered his top- and bottom-line targets for the second quarter on Wednesday. He is now perched below Wall Street's revenue and earnings consensus averages. Bollin's channel checks show that sell-through trends remain weak, particularly in Europe.

Times have changed for the fitness-monitoring industry as folks are turning to smartphones and smartwatches to do many of the tasks that Fitbit's flagship products perform. Fitbit used to be able to generate sales growth with new rollouts, but that's just not happening. The late March release of Alta HR is obviously not stirring up sales growth through the first half of the year. 

Fitbit's still selling millions of devices every quarter. It cleared 3 million units during the first quarter. Fitbit's challenges have been at the consumer level, and the short-lived market darling expects retail channels to be cleared of excess inventory by the second half of this year. 

There's still hope that corporate wellness -- where companies subsidize Fitbit bracelets to encourage active lifestyles and lower healthcare costs -- and medical utilizations pick up the slack, but those remain long-term plays. Enterprise sales account for less than 10% of Fitbit's current top-line results. Investors are braced for a rough report on Tuesday, and guidance for the second half of the year will be what ultimately drives the stock higher or lower later in the week. 

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Rick Munarriz owns shares of Fitbit. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool has a disclosure policy.