Fitbit stock is cratering. Fitbit (FIT) delivered an all-around miss and 2018 outlook that fell well below expectations, and such FitBit stock is plummeting. Revenues of $571 million landed $18 million short of consensus, while adjusted net loss per share of -$0.02 fell two cents below the Street’s estimate.

Units sold did not fall as sharply as they had last quarter: -17% this time vs. -32% in 3Q17.

On profitability, gross margin continued to decline sequentially, now to 44.2% on a non-GAAP basis vs. 45.2% last quarter.

Considering the higher ASP and holiday quarter volumes, I thought this would be much better. Fitbit managed to keep opex under control at 43% of total revenues vs. last year’s much more concerning 50%. A very rich tax rate probably contributed greatly to the earning miss, which might please the more optimistic investor as a large chunk of the bottom-line drag seems to have been unrelated to the company’s core operations.

Looking ahead

I expect our device mix to continue to shift towards smartwatches over the course of the year. I expect to see Fitbit Health Solutions rise as well as and increase in premium subscribers, but this growth will be relatively immaterial to wearable device revenue. I think revenue will be approximately $1.5 billion. With a shift in device mix, and fixed cost deleveraging, there will be a hit gross margins, partially offset by operating efficiencies. I expect operating expenses to move 7-10% lower, to a target of $740-$700 million. Capital expenditures as a percentage of revenue of approximately 3.5% is anticipated. All iin all, I think that Fitbit is still in the woods.