Is iRobot A Good Investment Right Now?

2019 was not an easy year for iRobot, but the Roomba-maker looks like it’s ready to kick-off in 2020, giving investors food for thought.

Feb. 12, 2020

Between patent lawsuits, tariff threats, fierce competition, and stock decline, iRobot (NASDAQ: IRBT) looked like a risky stock, to say the least, coming into 2020. However, the new year has started well for the company, and despite concerns over a drop in business related to the coronavirus, the robot-maker is up roughly 20% since the start of the year. 

How is iRobot’s stock performing? 

Shares in iRobot jumped more than 18% on February 6 directly following a successful earnings report which showed a company that was turning things around. The U.S.-based firm reported stronger-than-expected results with revenue climbing 11% to $426.8 million.

What was even more encouraging was the top-line growth driven by the relative outperformance of its core U.S. segment, which saw revenue climb 15% to more than $270 million, despite competition from new rivals, SharkNinja.

“We believe that consumer demand … remains fundamentally healthy, although we expect challenging U.S. market conditions to persist into 2020,” said CEO Colin Angle.

Challenges to iRobot

If iRobot wishes to meet its full-year revenue guidance of between 9-11% growth, it will need to contend with a rising tide of competitors and perform better than it did in 2019.

iRobot was dealt a heavy blow last November when it lost a bid to halt rival SharkNinja’s production of its SharkNinja IQ robotic vacuum range. iRobot’s claims that the rival product was simply a cheaper knockoff of its popular Roomba i7+ fell on deaf ears and the company’s stock fell. There is also still the threat of smaller competitors such as Neato Robotics and China-based Ecovacs who have been encroaching on iRobot’s roughly 50% market share (as of 2018).

The U.S.-China trade war also had a negative impact on iRobot, as the company attempted to raise prices on its U.S. robotic vacuum cleaners in order to offset any cost increases in relation to the dispute. Luckily, this was not necessary, an 11th-hour deal was secured between the two largest economies in the world, but this is far from secure. 

New products from iRobot

When all is said and done, iRobot actually still has massive amounts of potential, with its latest earnings testament to that sentiment.

The company recently announced its intentions to launch its robotic lawn “Terra” mowers in 2020, which will put it in direct competition with industry titans such as Deere (NYSE: DE) and Stanley Black & Decker (NYSE: SWK).

Likewise, it is also working on something much more impressive — and sinister — a robotic butler with arms. Has anyone at iRobot seen any robot movie before? They always turn bad. Anyway, my perfectly rational fears aside, it was hinted at in January this year by CEO Angle that this robot butler will likely hit the market in the next five years or so. There is a gap here, with one of the main competitors in this arena, Google (NASDAQ: GOOG)(NASDAQ: GOOGL) largely dropping out of the robotics race over the past five years, leaving Boston Scientific (NYSE: BSX) as the company’s main threat. As well as this, unlike Google, iRobot appears to have developed its own technology rather than simply buying it.

Data potential for iRobot

In recent years, data has become king in tech. The usual big names such as Google, Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), and Facebook (NASDAQ: FB) are the first to spring to mind.

However, iRobot is also a massive data collector and has been partnering with Big Tech to build the perfect ‘smart-home’. With the rise of Alexa, Siri and co., the Global Smart Home Market is rising. It was valued at $55.65 billion in 2016 and is projected to reach $174 billion by 2025, growing at a CAGR of 13.52% from 2017 to 2025.

iRobot can ride this trend, as its flagship Roomba is just such a device in its own right, and can directly interact with Amazon’s Alexa. If you have the right combination of Amazon Echo and Roomba, you can say, “Alexa, vacuum the living room,” and your little robotic vacuum will spring into action.

iRobot is a company on the rise, and by the looks of it, it has plenty of ideas in its locker. With revenue growing alongside a rising market, it’s a stock that will benefit from the rise of the smart-home. 

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in iRobot. Read our full disclosure policy here.