30% Thursday – Fitbit Shows Us How Ridiculously Overvalued The Market Is

Down 30% in a day?

That's right, Fitbit (FIT) just fell from $12 to $9, dropping $1Bn in market cap overnight as they missed revenues ($503.8M) by $3.13M (0.6%%) and guide their Q4 projections 25% lower than expectations.  This isn't about FIT in particular, they are just the most recent disappointment this earnings season – this is about how a well-followed company, with 21 analysts on their case, who had an AVERAGE price target of $20.88, can fall from $30 to below $10 (66.6%) in a single year.

This is more an indictment of a market that is unrealistically priced than it is of just FIT.  I keep telling our Members not to mess around with companies that have dot-com level valuations of 100x or more of their earnings and FIT isn't even one of those, they will probably end up earning just under 0.80 for each of those now $9 shares – the reaction is simply an indication of how hollow the support is for any of these stocks – now that the smart money base has been removed – leaving only the sheeple and their tendency to stampede in overvalued positions that will SHOCK them at earnings. 

FIT's particular miss is due to a manufacturing issue that is already being fixed, the reaction is an over-reaction but only NOW, -66.6% after the year started, is FIT trading at a realistic price.  Facebook (FB) is down nearly 5% at the open, despite putting up $7Bn in Revenues, which is up 55% from last year and $2.4Bn in Earnings, which is up 166% from last year.  On the bottom line, FB made 0.82 per $127 share ($121 now) so call it about $4 for the year and that's a p/e in the 30s which is RIDICULUS – even with that kind of growth.  

This is exactly what happens when you reach the top of a rally and you have consistently refused to invest in fundamentally secure companies (ones that return at least 5% of your investment annually) – unless they are growing at incredible rates, the slightest misstep can spook your fellow investors because the value investors (smart money) have long ago pulled their support and it's just you dreamers propping up the prices –…
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