iRobot Corporation (NASDAQ:IRBT) fell 13% yesterday after the robotic vacuum cleaner maker’s third quarter performance was a bit of a mixed bag, between an earnings outclass, but a revenue shortfall.
Gene Munster – conveying a tech perspective from his research-driven, venture capital firm Loup Ventures – sheds encouraging light on the tech player, trumpeting just a week after having initiated coverage on IRBT: “iRobot sweeps away competitive threats.”
For the third quarter, IRBT experienced a 22% year-over-year surge with management lifting the full year guide from a range of $840 to $860 up to $870 to $880, indicating 32% year-over-year growth at the midpoint. The company saw 905,000 home robot unit sales in the third quarter, with 86% thanks to Roomba vacuums and 14% comprising of Braava wet floor products. Munster notes robust annual growth for both of these categories in various parts around the world, where impressive results domestically as well as in Europe, the Middle East, and Africa (EMEA) driving upside for the stock. This strong demand should persist into next year, with the IRBT team hiking full year 2017 growth expectations in the U.S. to 40% and in EMEA to 45%.
As far as Munster is concerned, the third quarter print reflects iRobot’s continued “leadership in the home robotic space,” with the analyst especially taking confidence in a fourth quarter outlook boost to the tune of 5%. One week later, the analyst already has “have become incrementally more upbeat on the company’s future and leadership role within home robotics space following these stellar results,” proving that one investors’ point of apprehension can translate to an analyst’s mark of success.
In reaction, the analyst has increased his short-term projections to take under account management’s higher guide, with IRBT now looking to sell 3.2 million vacuums and 503,000 wet floor products for the year.
“Despite elevated worries about increased competition heading into the quarter, iRobot continues to exceed expectations and experience 20% plus revenue growth over the past 3 quarters. Sep-17 results shows the perceived threat from competition is overblown, and indicates iRobot is defending their leading home robotics position,” explains the research analyst.
When looking at the United States, Munster recognizes “the most penetrated robotics vacuum market” of the globe, where under 10% of domestic households can say they have a robotic vacuum in their midst. Therefore, from both a domestic as well as an international runway front, “the future is bright for iRobot,” writes Munster, who expects that in the coming decade, the whole domestic robot arena will experience double-digit unit gains each year. By 2025, the analyst projects 26.5 million domestic robots will be sold, translating to a market opportunity weighing with promise at $5.7 billion.
Munster predicts, “The driving catalyst to increase robot adoption is increasing consumer awareness, and as consumers become more comfortable with robotic vacuums, this will cause increase demand for other domestic robot categories (mops and lawnmowers).”
Overall, this company is one to watch, as the analyst contends: “While iRobot is well positioned in the vacuum and wet floor markets, the company’s industry leading robotics expertise will unlock many opportunities in other domestic markets.”
Glancing down the line, Munster gambles the Roomba vacuum and Braava wet floor product line alike can see over 20% unit and revenue gains over the next three years. Short-term, the analyst will not be surprised to see a lawnmower set loose onto the robotics scene in the next 12 months, an asset that might bring an extra $60 million juice to IRBT’s incremental revenue in the first year while spiraling to a business boasting $200 million by 2022.
The word on the Street is far less enthusiastic than Munster’s singing praises of the robotic vacuum cleaner maker’s prospects, with TipRanks analytics exhibiting IRBT as a Hold. Out of 4 analysts polled by TipRanks in the last 3 months, 3 remain sidelined on iRobot stock while 1 is bearish. With a return potential of nearly 3%, the stock’s consensus target price stands at $67.00.