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Fitbit & Google 1Q20 schedules ?4

07:45 27-Apr-20


Fitbit has scheduled its first quarter report to be released after market close on May 6th.  Average analyst estimates call for a loss of 16 cents per share on $266M, rising to $366M this quarter.  Those numbers don't matter, and there will be no conference call.  Instead, I will comment at least briefly on Google's report tomorrow night.  The average of estimates there comes to $10.98 of EPS from $40.7b revenue, declining to $38.2b.

Just as Intel's report was a valuable measure of the economic changes taking place, Google's performance should help me to measure the services impact.  Again, I suspect those changes will be less immediately severe but more prolonged, and possibly even indefinite.  As a baseline, most estimates are for a 15 to 20% drop in global mobile device sales.  That matters to UDC as well as Fitbit.  Verizon reported less than a two percent drop YoY drop in mobile services for 1Q20, while AT&T's business was UP 2.5%.  However, neither period captures much of the virus impact and both companies pulled FY guidance. 

LG Display's report was a disaster and I think that will be more indicative for the medium to long term.  In particular, the weakening demand for televisions is another factor to watch with regard to both Google's advertising revenue and UDC's royalties.  Google is already cutting its own marketing budget in half and has reduced hiring.  That said, I think we'll start getting quantification on Google gaining both market share and margin in its cloud business, as I've long expected.  For long term GOOG investors, I think that evidence of diversification away from advertising should be most important. 

All of this will affect the chances of Google buying Fitbit, and with the SCotUS arguments discussed here having been delayed until October, the time to closing may well be extended.  Fitbit has already rebound to just under $7 in-line with my predictions, and the confluence means I'll no longer accumulate shares.  Given what I've already written about the composition of the market rebound to date, I'm also hands off of GOOG for the time being.