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Here's Why Fitbit Shares Took a Dive Again

Fitbit releases Ionic smartwatch. Photo credit: Aaron Pressman

Fitbit’s shiny new Ionic smartwatch was supposed to help the struggling wearables maker get back on top for the holidays, but it’s looking like a grim reckoning may be coming for the company next year instead.

Wall Street analysts say the new $300 device isn’t catching on enough to offset depressed sales of Fitbit’s simpler and lower priced activity trackers. And new opportunities Fitbit has pursued supplying devices for corporate wellness plans and medical research studies have yet to payoff.

On Friday, Stifel Nicolaus analyst Jim Duffy cut his rating on Fitbit’s stock to “sell” from “hold,” prompting a 9% drop in the share price. Trading at $6.20 at midday on Friday, the stock is down 15% in 2017 and has lost 69% since it went public in 2015.

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None of Fitbit’s efforts to diversify have succeeded, Duffy noted.

“Exiting 2017, innovation has failed to both unlock any meaningful healthcare business opportunities and inspire meaningful new consumer interest in the category,” the analyst wrote in his report. “While monetization avenues in the digital health space remain conceptually intriguing, realization of the opportunity has been underwhelming to date and there is nothing tangible to point to return on the associated R&D investment spending.”

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Under CEO James Park, Fitbit has been trying to return to its former glory days when it was the tops seller of wearables devices, with fast growing revenue and profits. That all came to a halt a year ago, when the market for fitness trackers got saturated, and Fitbit didn’t have enough new innovations to keep sales growing. Revenue has declined 35% in the first nine months of this year compared to 2016, while net income of $43 million in 2016 has turned into a net loss of $232 million this year.

The Ionic’s new features like new features like mobile payments, third-party apps and five-day battery life were supposed to appeal to smartwatch fans who were flocking to Apple aapl , Samsung, and Google googl products.

But analysts at Morgan Stanley say their checks have found inventories of the Ionic piling up at retailers, indicating soft demand for the Fitbit fit flagship. “Continued inventory build for the Ionic leaves us more cautious on Q1,” the analysts warned in a report on Thursday. “Store checks show a continued build up in Ionic inventories since Black Friday even as sell-through reached holiday peaks.”

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