iRobot (NASDAQ: IRBT) is a company that designs, builds, and sells robots across the world. With more than 30 million of its Roomba line sold worldwide, this popular robot vacuum is loved by many. Indeed, who wouldn’t want a perfect house companion that vacuums up all your dirt so you don’t have to?
As a leader in consumer robotics and beloved by many a Roomba-riding house cat, here are the reasons why iRobot is the one robot stock to buy right now.
A look at iRobot’s financials
iRobot generally makes money through its sales of the Roomba vacuum and the Braava robot mop. In the past, iRobot made money through defense contracts, building robots for the military. It has since stopped this and is now a consumer-only robot company.
In its most recent quarter, iRobot posted revenue of $365.6 million, up 31% year-over-year (YoY). However, the company posted a reduction in its earnings per share (EPS) coming in at $0.27; for the same quarter the year prior the EPS was $1.06. The first half of 2020 saw the company receive an exclusion on certain tariffs, the same exclusion was not given this year, and as such operation income was more severely impacted.
iRobot’s balance sheet is also extremely healthy as it has no debt with access to a revolving line of credit worth $150 million. Alongside this, the company has $415.8 million in cash, cash equivalents, and short-term investments.
What I like about iRobot
The revenue growth for Q2 was primarily driven by strong demand for its mid-tier and premium floor cleaning robots in North America and across Europe. Indeed, Roomba robots are the industry leader for robotic vacuums across the world, with a 75% market share in North America. It also has a 62% market share worldwide (excluding China). Furthermore, Roomba has participated in Amazon’s Prime Day event for seven consecutive years and each time, Amazon cites Roomba as one of its best-selling items.
The Roomba occupies eight of the top 10 best-selling Robotic Vacuum Cleaner models in the U.S., six of the top 10 in Europe, and nine of the top 10 in Japan. With this popularity, it is with great anticipation that many are excited for iRobot to produce its robot lawnmower. It is the company’s excellent mapping system that will make this product such a hit. Whilst other robot lawn mowers need a wire or a solid boundary to keep it on the grass, the Terra will not.
The company also released its Home app in 2020, meaning that Roombas, Braavas, and Terras will be more easily controlled with customizable cleaning patterns. This is clearly a company that is innovative and knows the needs of an average household well.
Risks to iRobot’s share price
iRobot has this year shown that any disruption to the supply line can cause huge delays. These delays caused by covid-related chip shortages caused iRobot to miss $17 million worth of orders this quarter. Although the company planned for this eventuality, the vulnerability of its business model has been exposed. This is particularly relevant as it is a hardware company with no recurring revenue streams.
The Roomba might hold the largest market share, but with the many vacuum companies out there, the robot vacuum market is expanding to include those brands as well. Competition in this market will become a very real struggle for such a niche company.
iRobot’s growth potential
iRobot has plenty of potential moving forward, 27% of its operating expenses were spent on research and development in Q2. If the company can figure a way to bring in a subscription as part of its business model it can protect itself from supply chain issues in the future.
The Roomba is loved by many people and as such, it will certainly continue growing as a company, particularly if it continues to bring out new and improved models. All it needs to do is stay ahead of the growing crowd of companies that now produce their own versions of a robot vacuum cleaner.
If iRobot has piqued your interest but you are still unsure if it is a worthwhile investment, why don’t you take a look at these three best robotic ETFs to buy instead?
Contributing Writer at MyWallSt
Poppy likes companies that go the extra mile. Her favorite stock is Amazon because she is fond of its innovation, variety, and creative solutions to sustainability.