iRobot (NASDAQ: IRBT) is a $3 billion company that designs and builds consumer robots — namely automated vacuum and mops for households. The company’s stock had an impressive 2020, growing 59%.
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The bull case for iRobot
The consumer robotics leader is focused on making advanced robotics the norm for households. As consumer attitudes have changed and the concept of having a robot doing the home vacuuming and mopping has become more acceptable, iRobot has been consistently innovating and developing its high-end products. The company spent almost $160 million on research and product development in 2020. iRobot’s latest i3 and i3+ Roombas have been fitted with advanced three-stage cleaning, self-emptying features, and personalized cleaning routines with schedules. This attractive product development has been reflected in its sales. The company has developed its Terra robotic lawnmower, although its launch has been postponed for now.
The company released its Home Genius Intelligence in 2020, which is a platform that gives Roomba owners greater control over where, when, and how their product cleans. This makes the product much more customizable. The company is constantly differentiating itself from its competitors, and safe to say the Roomba is the best quality product of its kind on the market.
iRobot has experienced impressive growth over recent years with expectations for it to continue. Full-year 2020 revenue rose to $1.43 billion, an 18% increase over $1.21 billion in 2019. Q4 202 saw 28% growth in the U.S. with 27% growth internationally. The Roomba is becoming more popular, especially in Japan, with 39% growth. The company has focused more on its e-commerce segment, with direct-to-consumer revenue standing at $151 million in 2020, a 114% increase, but the pandemic also aided this growth. The company’s premium robots with a retail price of $500 or higher have seen impressive revenue growth of nearly 50% in 2020.
The bear case for iRobot
iRobot has had some recent alarming setbacks. The U.S.-China Trade War has impacted the U.S.-based company negatively, with a 25% tariff on all of its products being reinstated at the beginning of this year which is expected to inflict between $41 million and $43 million in incremental full-year costs on the business. The company is trying hard to recover, mostly by reducing its dependence on Chinese manufacturers by ramping up its production capabilities in Malaysia. Nonetheless, this is extremely worrying for the company.
2020 was an extremely uncertain year globally, and we’re still not sure how the next few years will play out in terms of recessions and pullback on household expenditure. A Roomba is a premium, luxury, and non-essential product, and so it’s unclear as to whether sales will experience a considerable drop for 2021, which would be bad news for iRobot.
So, should I buy iRobot stock?
This company could have amazing potential, with an incredible product and great brand loyalty, too. The company is trading considerably lower than its January 27th all-time high of $161 per share, which is attractive. I do, however, see the current bear case as a problem — but nothing that can’t be resolved in the near future when the U.S. and China relationship stabilizes.
Quickfire round:
How many Roombas have iRobot sold?
The company has sold over 35 million Roombas to date.
How much does a Roomba cost?
Roombas vary in price depending on the model. Prices range from $320 to $1,300.
What did iRobot do before pivoting towards vacuums and mops?
The company was founded in 1990 and specialized in military and police robots. One of its first products, Ariel, was used to detect and remove mines.
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