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iRobot Faces Temporary Headwinds, But The Thesis Is On Track

Aug. 03, 2021 2:17 PM ETiRobot Corporation (IRBT)27 Comments
Jamie Louko profile picture
Jamie Louko


  • iRobot reported their Q2 2021 earnings recently, on July 28, 2021.
  • Their profitability tanked during the most recent quarter due to tariffs, and they were constrained due to the semiconductor chip shortage that has affected many business recently.
  • However, these short-term headwinds do not pull iRobot off the main investment thesis, which is why iRobot is a Buy for long-term investors who will hold longer than three years.

iRobot Roomba 980 Cleaning Vacuum
Onfokus/iStock Unreleased via Getty Images

The Thesis for iRobot

iRobot's (NASDAQ:IRBT) recent quarter was a mixed bag for many investors. iRobot was one of the few pandemic plays that weren't hit hard by the reopening, yet iRobot faced many

This article was written by

Jamie Louko profile picture
He is a college student who has found a deep thirst for learning and investing. Being very young, he has leaned toward very long-term investments and growth stocks, primarily in tech. He does, however, love consumer goods companies as well. Currently, he is studying International Business and Economics.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of IRBT either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (27)

Great article! I remember all the negativity around Ford in 2019 when I bought that stock for $8. When a company got a great product and undervalued, it will always come out with flying colors. One thing that I don't understand is, iRobot got many patents. Many companies are copying iRobot design including Samsung, are they succeeding on this legal battles? Technically, the more companies get into robot vacuum space, the better for iRobot because their competitor will do the job of educating the customer and convincing them why they need a robot vacuum. When customer tries to buy one, they will most go for the best in the market which is iRobot (same thing happened with Telsa).
Diesel profile picture
This company is most likely an acquisition target more than anything.
I am invested with about 3 % of my Portfolio. In my opinion home automation will be a huge trend. So many people already using the robotic vacuumcleaners and almost everybody is complaining. But for many brands. This technology is far from finished and has only started.
I assume IRBT is in a great position to launch future products. Hopefully they can create a good platform for managing a few home robotics. This will create additional exit barriers for existing users.

I dont fear temporary pricing headwinds due to chip shortage. I only fear cheap china copies.

Its not the easiest investment to make. But valuation is pretty low already and if they can manage to grow top level at 15% and get a net margin of 10 %. I am pretty sure we will see a different stock .
Rizzi Capital profile picture
@Niko Theodoridis Net margin of 10% ----- hahahahahahahahahahaha
13 Aug. 2021
While I am an investor, I don’t own IRBT stock nor puts/calls, nor am I short the stock. We do own their products and have owned them for years. So I thought perhaps our experience with IRBT products could be helpful to others at SA.

In short, IRBT’s latest flagship S9+ robot has been a disaster. We are on our 4th replacement and it looks like that will soon be 5. Check out Lowes customer comments. I think about 50% rate it in the 2 lowest quintiles (1 or 2 stars out of 5). These are accompanied by many comments stating they will never buy another Roomba.

I know these are anecdotal cases but this refers to the company’s most expensive product (the S9+) which, in our case, after a February software update, spends 3 to 6 hours vacuuming the same space it previously only required 90 minutes to clean. This seems to be due to it’s penchant for incessantly moving in random circles and losing its way. The unit also seems unable to deal with one of the very popular “home net wifi systems” we have.

In addition, all of the later replacement robots seem to be manufactured with material that attracts and holds pet dander and dust like glue requiring a tedious weekly cleaning of surfaces and sensors under the rollers (our first S9+ didn’t have that issue).

In our case, I have been spending many hours dealing with this on the phone with customer service, cleaning the robot, and 5 or 6 hours re-mapping our home each time we get a new unit.

Perhaps none of this is meaningful, but perhaps, Medium to long term, it could have an impact on the stock if IRBT loses reputation as more people experience issues with a very expensive product they have been unable to correct thus far.

Thanks for the comment re: IRBT. It's nice to hear about a consumer experience with their products.
21 Oct. 2021
@jk31 just an update to my earlier post: iRobot put out a new software update and all the issues were solved.

However, there was no public or private mea-culpa, no apology for an expensive product that was essentially useless for 7 months, all the hours many customers spent on the phone with a customer service in denial of the issue, no admission re iRobot causing the problems nor the many hours trying to “fix” the disappointing product. Nothing at all. Zero.

It makes you wonder about the levels of competence in iRobot PR, CS and tech departments and, mostly, the executive suite.
Rizzi Capital profile picture
Competition is eating them alive. And in a tougher economy, the low end will see the most growth (i.e, their competitors). Their margins are atrocious because they are the IT department for the whole industry. Their leadership team is ancient. They buy back shares, but issue them just as fast (faster, in fact) - they have more shares outstanding now than in 2017 or 2018.

It's one mistake after another and wall street has lost all confidence in them. That is why IRBT can grow the top line at 30%, but the stock falls and is barely trading at 2 times net tangible assets. At $40 per share it is worth a chance, but at $85, you should not touch it.
@Rizzi Capital
Have you even looked at their income statement/balance sheet at all?
Rizzi Capital profile picture
@Lunch_Buffet Yes I have. What exactly is it about my statement that you disagree with?
Jamie Louko profile picture
@Rizzi Capital In a tougher economy, most people will be vacuuming their own houses, not buying a cheap, poor-quality Roomba knockoff. There is a reason why iRobot products are the most expensive: all the other products are poorly made and not worth a dime. And, looking at this quarter, shares outstanding have decreased the last year... Just about every growth-based company will have a higher share count today than in 2018, so that doesn't say anything about this business specifically. Other than the Terra (which was only delayed, not a flop or a mistake), execution and growth have been quite strong and impressive. Their software and app additions are really unique. I wouldn't say that iRobot has made many mistakes in the past few years...
What happened to Terra?
@HPBunker Last year, Terra’s launch was paused in April 2020 to prioritize investment into other areas, namely to accelerate the buildout of our direct-to-consumer (DTC) capabilities and software-centric development activities. While Terra was close to launch, it also was at the earliest stages of commercialization with an extensive, multi-year roadmap for new features, enhanced functionality and better performance. The company also stated that "Progress in expanding our DTC capabilities will increase the likelihood that we can successfully and efficiently enter new product categories. Based on this approach, our efforts around the robot mower market are on hold for the foreseeable future. To the extent we restart our efforts in this area, we will do so in stealth mode and will not be providing updates on a quarterly basis."

Hope you found this helpful.
@Ben Brumfield

I appreciate your taking the time to respond. It's just that you're quoting the company, and what they've had to say hasn't been helpful.

What I find strange is that lots of other companies already sell robot mowers. IRBT is falling further and further behind the curve in this market. I have trouble understanding why they just gave up.

In the US especially, we've had this huge trend of people dumping their urban apartments and condos, and buying houses in the suburbs with... lawns!

I find lawns to be boring and ecologically wasteful. But robot mowers are surely a product worth manufacturing. Especially in hot, southern states, homeowners hate mowing their own lawns.
@HPBunker They didn’t state that the project was dead. The focus has just shifted to growing and supporting the customer base. I think they are going to launch a mower that is better in every way. My guess is that they jumped the gun a bit announcing it before it was ready and combined with the pandemic, it made more business sense to switch gears a bit.

From my brief research I haven’t found a robotic mower that doesn’t require cumbersome boundary wire to be installed. Also, another challenge with current robotic lawnmowers is that they are all incredibly expensive.

If iRobot were to come out with an easy-to-use boundary free robot lawnmower and offer it on the select program, I think they would do quite well. I agree with their approach to invest heavily in supporting a strong customer base, so that when they come out with a refined robot mower, they will be met with a large customer base and a proven recurring revenue model to launch it on.
alex352 profile picture
Thank you for your article Jamie!
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