Bull of the Day: iRobot (IRBT)

Tracey Ryniec
·3-min read

iRobot Corporation (IRBT) is one of the "stay at home" winners during the coronavirus pandemic. This Zacks Rank #1 (Strong Buy) saw third quarter revenue jump 43% year-over-year as consumers rushed out to buy the Roomba and other products.

iRobot designs and builds robots for us both inside and outside the home. It’s products include the home robot Roomba Robot Vacuum which debuted in 2002 as well as the Braava family of mopping robots.

Big Earnings Beat in the Third Quarter

On Oct 20, iRobot reported its third quarter results and beat the Zacks Consensus by 183%. It reported earnings of $2.58 versus the consensus of just $0.91.

Revenue jumped 43% to $413.1 million from $289.4 million in the year ago quarter.

The US saw 75% revenue growth with 22% in EMEA and 12% in Japan over the prior year.

Online was hot on the company’s website and app as well as on traditional retailers’ websites. It grew about 70% and represented approximately 60% of the entire quarter’s revenue.

Direct-to-consumer jumped 155% to $35 million versus the third quarter of last year.

Full Year Guidance Above Expectations

With a strong third quarter, the extension of its tariff exclusion until the end of the year and bullish orders for the upcoming holiday season, the company sees fiscal 2020 above its original 2020 guidance.

Earnings are now expected in the range of $3.43 to $3.53.

However, even with the analysts raising the Consensus, it is still falling a bit short with the Zacks Consensus jumping to $2.98 from $2.45 in the last week. I would expect the consensus to rise further from here.

That’s earnings growth of just 0.3% as the company made $2.97 last year, but look for it to move higher to be in line with the company’s guidance range.

Plenty of Cash and Teladoc Health Stock on Hand

As of Sep 26, 2020, iRobot had $357.3 million in cash, cash equivalents and short-term investments on hand. That’s up from $242.3 million as of June 27, 2020.

It received about $35 million in tariff-related refunds  and approximately $52 million in Teladoc Health stock which it got in the third quarter when Teladoc Health acquired the company’s stake in InTouch Health.

iRobot’s Teladoc Health shares are subject to sales restrictions until early 2021.

iRobot has no debt but it does have access to a $150 million unsecured revolving line of credit.

Shares Soar in 2020

Wall Street has deemed iRobot a pandemic winner as its shares have soared 61.9% in 2020.

Shares aren’t cheap, on a P/E basis, with a forward P/E of 28.

But for investors looking for a company with no debt, cash on hand and a hot product for the home, iRobot is one to keep on your short list.

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