iRobot - Time Arbitrage

Aug. 13, 2019 9:06 AM ETiRobot Corporation (IRBT)9 Comments
Zhi Xian Lim profile picture
Zhi Xian Lim


  • Actions of investors concerned with the immediate term have outweighed that of those with a long horizon in the recent plunge of iRobot's share price.
  • The future remains promising due to the company's strategy, expanded portfolio and potential role in the Smart Home.
  • A possible exclusion from tariffs could reverse price movement.
  • Valuation suggests a time arbitrage for exploitation.

One seeking to make sense of the recent price movement and discern the way ahead for iRobot’s (NASDAQ:IRBT) shares could perhaps look to the theories of Philip Zimbardo. Probably better known for the Stanford prison experiment, the psychologist also conjectures that every decision one makes is governed by his internal time perspective.

iRobot had two quarters that shaped up to be poorer than expected. It also has depressed guidance for the rest of the year due to the expanded tariffs to be imposed in September. This certainly justifies a correction from prices at which high expectations that will no longer be met was baked in. Yet, the same pricing efficiency does not extend beyond the immediate term. The company has enormous potential that is currently overlooked amidst the fear. More than just a distant uncertainty, some of iRobot’s promise is on the cusp of being realised while the company’s strategy continues to augur well for what could come after. Viewed through the lens of Zimbardo’s theory, the actions of present-oriented investors could be said to have outweighed that of the future-oriented. In this piece, I examine iRobot as an investment after the precipitous correction.

Business Geniuses and Tech Futurists

iRobot lauds its Roomba S9 as the world’s best robotic vacuum cleaner. Equipped with multiple proprietary features such as the Imprint TM Smart Mapping Technology and Clean Base TM automatic dirt disposal, it is the latest in their line of Robotic Vacuum Cleaners (RVC) that have allowed them to gain the majority of market share in every region other than China. Yet I would contend that these features are but the slightest of their competitive advantage. In a field where cutting edge quickly becomes run-of-the-mill and the most advanced remains but for awhile, iRobot’s greatest treasures are its talent and the environment that it has established.

This article was written by

Zhi Xian Lim profile picture
Lim Zhi Xian revels in learning and doing his own thinking. He believes in only sharing good ideas that have been rigorously thought through. A military officer by profession, Zhi Xian has a BBA(Hons) in finance and operations management. He is a CFA Level 3 Candidate.As of Jan 21, average return (from inception) of recommendations stands at approximately 197%.

Disclosure: I am/we are long IRBT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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