With shares trading at $63.77 USD, iRobot Corporation (NASDAQ:IRBT) is not the cheapest small-cap play to consider. But at this price, IRBT stock is actually half of what it was worth only four months ago and could be considered on sale.
The summer spelled disaster for iRobot, meaning, year-to-date, the stock is down roughly 16%. But early 2019 looked very different. For the first four months of the year, shares packed on 64%. Then May happened.
IRBT Stock: Opportunity?
Shares plummeted in May when iRobot’s quarterly results missed analysts’ expectations. The company underwhelmed with revenue growth of 9.5%—Wall Street’s consensus was closer to 16%. Adjusted earnings of $0.78 per share beat estimates of $0.59, but this wasn’t enough to save IRBT stock from tanking.
Not even the company’s “outlook for 2019 revenue to increase 17% to 20% year over year,” helped its cause.
IRBT Stock: Advanced Tech
As an advanced technologies and robots maker, iRobot is releasing new robots later this year that, it expects, will allow for such growth. There are three new robots coming to its line in 2019: the new high-end Roomba s9+ vacuum, the Braava jet m6 floor-mopping robots, and the Terra robotic lawnmower.
Its business of building and selling home-robots is arguably a tough industry.
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On the one hand, how well will consumers embrace these expensive new products? Does the average household want or need a self-driving lawnmower?
But even if so, iRobot CFO Alison Dean has warned the new robots will initially sell at lower margins “than the cost-optimized products they are replacing.” This could lead to profitability taking a hit while the company figures out its production efficiency.
iRobot is also likely to be hit by global trade tensions, and this is something to be considered. The company is already being hit by tariffs imposed on its products manufactured in China and imported into the United States.
But the Pros are There for IRBT Stock
But on the other hand, operating in the Internet of Things and advanced technologies category lends itself well to the business. This sector is growing double-digits, with further product adoption more likely as we opt for more tech-savvy products.
And there are the fundamentals to consider, as InvestorPlace puts it: “at 24 times next year’s earnings, IRBT isn’t very expensive for a company in a rapidly growing category. With the company capable of driving 20%-plus EPS growth going forward, that multiple isn’t very steep.”
What are your thoughts on IRBT stock?
Featured Image: DepositPhotos © duskbabe
