Categories Analysis, Technology

iRobot (IRBT) stock drops to a 4-year low on growth concerns

iRobot Corporation (NASDAQ: IRBT) stock dropped to a 4-year low of $36.11 on Tuesday due to stiff competition in the market and the weak forecast for the year as well as the outbreak of COVID-19 coronavirus. The investors remained concerned about the company’s stock, which is undervalued at current levels with a 31% estimated return.

The consumer electronics industry currently faces immense pressure from the COVID-19 coronavirus outbreak while the trade war had a hold earlier. iRobot experienced huge selloffs recently due to coronavirus and the steep dip in the crude oil prices. The respiratory illness has hit the world hard with the global confirmed cases rising to over 114,000 and deaths topped 3,800.

Image for representation. Courtesy: Alex Knight on Unsplash

The company has been struggling in control spending as it continues to make investments in areas that are believed to be critical for long-term success. The company continuously cost-optimize the sourcing and integration of key product components and sub-assemblies, and increasingly automate the manufacturing process as part of efforts to cut production costs.

iRobot plans to continue to leverage opportunities, enabled by its growing connected product portfolio, to invest in developing technologies and interfaces for its products to provide a convenient, personalized, feature-rich and effective user experience.

The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting customer needs and expectations and the likely increased introduction of new products. The company has been struggling in the competitive world as the rivals possess significantly more financial and other resources. However, the company continues to customer demand as well as maintain and improve customer satisfaction.

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In the near-term, the company is expected not to achieve significant sales from its newly introduced robots due to the delay in the purchasing power arising from the coronavirus outbreak. This is likely to lessen the top-line growth of the company in the next quarter.

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Apart from the virus outbreak, the company continues to be impacted by the direct and indirect headwinds from the US-China trade war and escalating tariffs. Also, iRobot faces challenges related to suboptimal sales, excellent progress with supply chain diversification, and disciplined management of cost structure.

For fiscal 2020, the company expects revenue in the range of $1.32-1.35 billion and adjusted earnings in the range of $1.70-2.30 per share. The earnings are anticipated to be in the range of $0.55-1.15 per share for the full year. The company continues to execute on 2020 strategic priorities to fuel growth, defend category leadership and fund initiatives critical to long-term value creation.

The stock opened higher but dived to the red territory in the early trade on Tuesday. The shares are trading below the 50-day moving average of $50.63 and the 200-day moving average of $52.61. The stock is expected to show negative performance in the near and long-term as the experts predict a bearish pattern.

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