Here’s What Really Matters for iRobot Corporation; Analyst Robert Burleson Shares Insight

Canaccord's Robert Burleson is neutral on IRBT stock despite a 4Q revenue beat, cutting his EPS expectations for the year.


iRobot Corporation (NASDAQ:IRBT) investors enjoyed a more robust than anticipated fourth quarter print yesterday evening in many ways, with signs of rising gains in the robotic vacuum arena.

However, one analyst remains quite wary, as though the three-year revenue outlook is encouraging, and the quarter proved to be “solid,” the operating margin outlook “weighs” heavily in the balance.

Canaccord analyst Robert Burleson is going as far as to cut his EPS expectations for 2018 in reaction to the mixed earnings outlook.

Apprehensive on a quickly growing rivalry in the robotic vacuum playing field, the analyst reiterates a Hold rating on IRBT stock with a $65 price target, which implies a just under 5% upside from current levels. (To watch Burleson’s track record, click here)

“While we believe the robotic vacuum cleaner category is expanding, we remain concerned that competitive pressures could hamper leverage to the bottom line. We also believe that the top line growth outlook through 2020 is predicated in part on success outside of the robotic vacuum cleaner category, something heretofore not demonstrated by the company,” writes Burleson.

For the fourth quarter, IRBT posted $326.9 million in revenues and $0.16 in EPS. However, EPS underperformed the analyst’s forecast of $0.22 and consensus of $0.25, with Burleson pointing to a $0.41 shadow from tax reform coupled with the revaluation of deferred tax assets and a provisional repatriation toll charge. Yet, not factoring in the effects of the tax reform, EPS for IRBT’s quarterly performance could have outperformed the company’s own expectations thanks to stronger than anticipated results on the domestic front as well as in the Europe, Middle East, and Africa region.

“Total revenues increased 54% Y/Y in the fourth quarter driven in large part by a positive impact from the company’s targeted marketing initiatives in US, EMEA and Japan,” the analyst adds. Notably, IRBT’s revenues for the quarter surpassed Burleson’s $318 million forecast as well as consensus of $319 million- and even the company’s own guide from $313 to $323 million.

The IRBT set an opening 2018 guide between $1050 and $1080 million in revenues and set EPS outlook between $2.10 and $2.35. Though revenue beats out Burleson’s expectations for $979.3 million and consensus of $1016.4 million, EPS far underperforms the analyst’s and consensus expectations looking for $2.70.

“Management highlighted anticipated continued investment in both sales and marketing and R&D is expected in 2018 with the company planning to launch multiple new products in 2H18,” Burleson concludes.

Additionally, the IRBT team revised its three-year financial targets angling for roughly 20% revenue growth, 50% to 51% in gross margins, and a goal for operating margins to hit 10% within two years.

TipRanks showcases a sidelined majority backing Burleson’s opinion on IRBT stock. Out of 5 analysts polled in the last 3 months, only 1 is bullish on the tech stock with 4 hovering on the sidelines. Yet, these analysts lean far more towards the bullish camp, with a 12-month average price target suggesting a healthy nearly 24% in return potential for shares.