Seeking Alpha
Long/short equity
Profile| Send Message|
( followers)

I believe iRobot Corp (NASDAQ:IRBT) will trade over $80 within 2014, or it will be acquired. iRobot designs, develops, and markets robots for the consumer, government, and industrial markets worldwide. It is one of only two pure plays in the robotics space available in the U.S. equity market (the other being Adept Technology Inc., ADEP). Robots are trending as a new hot sector, and despite the lack of pure plays, there is already a new ETF, Robo-Stox Glbl Robotics & Automation ETF,(ROBO), capitalizing on the industry's momentum.

iRobot is relentlessly innovating and updating its technology. For example, iRobot's recently released Roomba 880 vacuum has a new feature, the tangle-free AeorForce extractors. These extractors are much better than spin brushes on most vacuums and are the perfect example of the ways in which iRobot is creating advances in technology. Moreover, the new Roomba 880 is still on backorder, and if you want to purchase it on eBay (NASDAQ:EBAY) you may have to pay above and beyond the retail price. (Check out iRobot's new Roomba and Scooba on their site here. Also check out the New York Times review here.)

Moreover, Google (NASDAQ:GOOG) has recently been on a robot-company buying spree. One of their acquisitions was of robot maker Boston Dynamics, the leading provider of human simulation software, tools, and solutions. In addition to buying Boston Dynamics, Google has acquired NEST, the home consumer hardware and "internet of everything" company, for $3.2 billion. These two companies I had hoped would IPO sooner than later so we could participate in their success. Sadly that will not be the case; now to participate with those companies you have to own GOOG. I believe IRBT is essential for Google's robot portfolio and consumer home hardware long-term goals due to iRobot's intellectual capital as well as its large patent portfolio. (You can read more about Google adding to its menagerie of robots here.)

iRobot currently holds over 400 patents, and the Patent Board recently ranked the robotics company's intellectual property portfolio as number five overall, beating out the likes of Samsung, Panasonic and other, larger companies. Furthermore, iRobot's patent portfolio is ranked #2 in the category of "Science Strength," and is ranked #3 in the category of "Industry Impact," beating out much larger industry leaders. With these patents, iRobot has created a nice moat that Warren Buffett would appreciate. (You can read more about the patents and iRobot's rankings here.)

One of iRobot's main competitors in the vacuum space is Dyson. Dyson wants to create their own vacuum robot, however, without using any of iRobot's patents, that may prove difficult. Maybe Dyson, a private but highly successful vacuum and fan company specializing in efficient motors and air-moving technology, will try to acquire its competitor iRobot. May I go so far as to say that if Dyson did acquire iRobot, they may have a monopoly on the future of vacuuming? (You can read about Dyson and their robot vacuum vision here or here.)

Additionally, if Google or Dyson do not buy IRBT soon, I believe Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), or even Apple (NASDAQ:AAPL) will. These companies all want a piece of the robot revolution and the internet of things in our homes. Furthermore, the other big boys may have to play defense and acquire iRobot just to block Google from controlling the whole space. I believe Apple is specifically a good fit considering Colin Angle, iRobot's CEO, has a similar vision of a closed-end software and system world as does Tim Cook. Moreover, with Apple's skill for giving its devices some pizzazz and panache, they could makeover iRobot to be one of the must-have hip devices. Each of these would-be acquirers would yield significant synergies.

Lastly, even if IRBT is not acquired, there is a very bright future for this company. Despite the fact that IRBT has sold over 10 million of its robots, I believe the growth has not even started. The last two robots, the Roomba and the Scooba, have advanced enough that they are finally worth the cost. Finally with the new advances these robots are not just gimmicks but have a value proposition.

In addition, IRBT is making is innovations in defense and healthcare. The iRobot defense robot, Packbot, is about to be tested and shown off to the world during the World Cup in Brazil (read here). Furthermore, RP VITA, a remote presence robot, is advancing the way we deliver healthcare (shown here).

In conclusion, iRobot has perfectly positioned itself for the robotic revolution that is happening now. It is the best U.S. equity available to expose your portfolio to the robot revolution and the consumer "internet of everything" hardware that is about to invade our lives and homes. I believe IRBT will trade over $80 within 2014, if it is not acquired first.

Disclosure: I am long IRBT, GOOG, ADEP, ROBO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: iRobot Should Trade Over $80 This Year, If It Is Not Acquired First