iRobot Looks Fine if You’re Playing the Long Game
Robotic vacuum maker iRobot reported its 1st quarter earnings on Tuesday and got absolutely roasted in after-hours trading. Shares are down 14.76% on the news, making it one of the worst days ever for the stock. I personally thought it was a bit of an overreaction, but it still wasn’t a great showing.
Here are the highlights from the report:
Sales of $237.7 million in Q1, up 9% YoY.
GAAP earnings per share of $0.78 compared to $0.71 in the 1st quarter of 2018.
Reaffirmed full-year guidance for revenue and operating income.
The revenue number was a slight miss vs. analysts expectations and was probably the reason for the giant drop in the stock price. The earning’s number was higher than what analysts thought but was mostly due to a one-time tax benefit, not improvement in the core business.
Why iRobot Will be Fine
Overall, this was a mediocre report, but nothing to lose sleep over. Sure, sales slowed a bit for one quarter, but that’s all it is: one quarter. The company is still guiding for 20% top-line growth over the long-term and has plenty of new initiatives in the pipeline.
iRobot is planning on launching two new products in the second quarter, and they still haven’t tapped out demand on their new i7 Roomba models. Don’t forget that the revolutionary Terra lawnmower is coming out in the latter half of 2019, which should start accelerating sales growth over the next 2-3 years.
A short-term investor might look at this report and think more bad news is right around the corner. But if you keep a long-term time horizon as we do at MBM, then this 15% price drop shouldn’t change your opinion on iRobot’s business potential. In fact, it might make you think about scooping up some shares yourself.
Disclosure: The author is not a financial adviser, and may have an interest in the companies discussed.