Why iRobot Earnings Impress Markets

Who could believe consumers have a high demand for robotic vacuum cleaners. iRobot (NASDAQ:IRBT) reported incredibly good results that reminded markets the market strength in this area of robotics. The company benefited from a strong holiday season.

iRobot reported non-GAAP EPS of $0.84, beating consensus by $0.34. Revenue grew 17.7% Y/Y to $384.67. The stock soared 17% on the week and is up a solid 87% from 52-week lows. The short float of 32% may explain the stock’s surge following earnings.

Shorts Stunned by iRobot

In 2018, iRobot raised its expectations twice, which should have discouraged shorts from betting against the company. The stock’s valuations are high but not excessive at below 40 times earnings. EPS may slow to just 7% next year and to 18% over the next five years. But management will continue leading the company’s growth through the launch of new products and technologies.

This year, the company forecast revenue growing by 17% - 20%. Deeper household penetration of the Roomba product is driving revenue higher. In 2018, it launched i7, i7+, and E5 robots. This year, iRobot Terra will take on the lawnmower market.

The firm is circumventing U.S.-China trade risks by looking for a manufacturer outside of China for iRobot Terra.

Takeaway

The $1.28B - $1.31B revenue forecast, operating income of up to $118 million and EPS in the $3 - $3.25 range suggests that IRBT stock will not fall after that big rally last week.