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iRobot (IRBT) Gains From Solid Product Portfolio Amid Cost Woes

·3 min read

On Jan 21, we issued an updated research report on iRobot Corporation IRBT.

In the past three months, this Zacks Rank #3 (Hold) stock has returned 14.4% compared with the industry’s growth of 9.6%.

Existing Business Scenario

iRobot has been benefiting from its diversified product portfolio over time. Notably, in the third quarter of 2020, revenues generated from the company’s premium robots (products having $500 or more as list price) increased 86% on a year-over-year basis. Also, its strong innovation capabilities, coupled with focus on launching new products, will work in its favor in the quarters ahead.

Also, the company aims to expand its recurring revenue sources and direct-to-consumer sales channel from the online platform. Notably, revenues generated from the online platform were roughly 60% of iRobot’s third-quarter revenues. Moreover, investments in building brand awareness are likely to continue playing a significant role in boosting demand for products in the quarters ahead. Based on the full-year projection, the company’s revenues for the fourth quarter are anticipated to be $480-$490 million, indicating a year-over-year increase of 12-15%.

However, uncertainties related to the coronavirus pandemic, stiff competition, inventory management by retailers and uneven demand trend across the globe might weigh on the company.

Further, iRobot has to invest heavily in development and marketing of products to hold its position in the highly competitive market. For the fourth quarter of 2020, the company expects operating spending (related to rise in incentive compensation, strengthening relations with customers, boosting software capabilities, advertising and marketing) of $190-$194 million. These expenses, if uncontrolled, can hurt its margin profile.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are Axon Enterprise, Inc AAXN, AptarGroup, Inc. ATR and Brady Corporation BRC. All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Axon Enterprise delivered a positive earnings surprise of 30.28%, on average, in the trailing four quarters.

AptarGroup delivered a positive earnings surprise of 10.91%, on average, in the trailing four quarters.

Brady delivered a positive earnings surprise of 2.95%, on average, in the trailing four quarters.

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