Company Profile: iRobot Corp
iRobot Corporation produces vacuum, mopper, and even lawn-mower robots to facilitate your home-cleaning. Previously, they have helped design robots for military and space travel missions with great success. The reason why this company has a bright future ahead is because of a common principle; "time is money".
Everybody talks about a future where robots and humans will coexist. Maybe this will be the case, maybe not, but one thing for sure is that tools to help us will rise in popularity. Nobody wants to clean the house on a daily basis, but everyone enjoys a clean house. iRobot has the solution of autonomous cleaning vacuums. Regardless, their stock has seen a massive drop since March 2019 where they traded around 120 USD, around the time that the US-China trade-war happened. Analysts mentioned that the company was being hurt by the higher tariffs and fairly so it dropped in value. In mid-February this year, China changed the would lift the tariffs of many products, including iRobot, and there hasn't been any price actions based on this news. Also, with the rise of the second market in autonomous vacuum cleaners, offering customers a cheaper products with a similar quality, it has impacted the company even more. Now the stock is just above 40 USD, but let's see what has happened recently.
On February 5th, iRobot Corp released their earnings report with a great earnings surprise and increased their guidance for the remainder of 2020 and 2021. The stock saw a 20% increase the day after, but has been climbing back down 28% from that day. There are a couple of reasons why this can be justified:
- The stock is heavily shorted. Short-sellers saw a new opportunity to short the stock at a higher price, bringing the stock down, instead of closing their short positions after a great earnings report. There is a high chance that because of this, iRobot Corp could implement a share-buyback program driving some short-sellers out of the market.
- Corona Virus uncertainty. This could be a valid case, during the investor's conference call they have mentioned that they anticipated the Chinese vacations and therefore produced more than needed. This is good to keep up with the demand.
- The market for vacuum cleaners is large, as there are many other companies imitating the designs and selling them at a cheaper price. Clearly, the quality isn't the same but there are many reviews that justify the price difference. Recently, we even saw AmazonBasics design a vacuum similar to iRobot's design.
It is definitely an interesting stock to track as the rising popularity of autonomous appliances increases. It will be a matter of some kicking the short-sellers out of the game by beating analyst's earnings expectations (which they have done so for the last year) to drive the price back to previous highs.