iRobot needs to regain investor confidence with Q2 results

When iRobot (NASDAQ: IRBT) last reported earnings results, it turned out to be quite disastrous. Despite posting better-than-expected earnings in Q1, investors punished the stock for missing the revenue estimate, sending the stock plunging 23%.

The maker of commercial robotic devices is yet to recover from the stock slide and will be looking to regain investor confidence with Q2 earnings. In the year-to-date period, the stock is up 15%.

LIVE: iRobot Q2 2019 earnings results

The Bedford, Massachusetts-based firm is next scheduled to report financial results after the closing bell on Tuesday, July 23. Analysts have projected an 18% jump in revenues to $267.96 million, helped by the solid demand for its products as well as the new launches including Braava jet m6 robot mop and Roomba s9+ robot vacuum.

iRobot sells its products directly to consumers through online stores and indirectly through resellers and distributors.

Meanwhile, profits are expected to decline to 3 cents per share from 37 cents per share in the same period last year. However, investors are not likely to give much importance to this as most of the cash is being used to develop and market new products, which is necessary for continued growth.   

Notably, in all four trailing quarters, iRobot has surpassed earnings estimates by a wide margin.

Headwinds from China

The company’s excessive reliance on China for manufacturing is hurting it, given the environment of tense trade relations. It has been working to shift some of the manufacturing capabilities outside of China, and the management might give an update on the same.

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However, to cautious investors, risks associated with a potential tariff hike is a dampener on an otherwise attractive stock.    

The stock has a 12-month average price target of $112.50, suggesting a 22% upside from Friday’s intra-day trading price.

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