The robots are coming, the robots are coming to clean your house, cut your lawn, and keep the pool water crystal clear. They might also come to go all Terminator on us, but at least the house will be in good order for the kids.
“The Household Robots Market is Expected to Grow from USD 3.3 Billion in 2019 and is Projected to Reach USD 9.1 Billion by 2024; it is Expected to Grow at a CAGR of 22.4% during the Forecast Period,” according to research and markets.
Robovacs are the most popular consumer robots and should offer solid growth potential for the next five-years. “The global robotic vacuums market is likely to grow at US$7150.60 Mn by 2024 from US$2852.52 Mn in 2018. The market is expected to register CAGR of 17.53% over the forecast period.”
iRobot Corporation NASDAQ: IRBT dominates the robovac space with 52% of the worldwide market and 82% of the United States market. They also had one of Amazon’s Prime Days’ most popular items. The iRobot Roomba Vacuum was listed as one of the top-selling deals. Apparently, many are like ex-Dallas Cowboys quarterback and CBS football announcer Tony Romo in the Sketcher’s Super Bowl commercial and like “things to be easy.”
We’ll see just how popular the consumer robots are when iRobot Corporation NASDAQ: IRBT issues its second-quarter 2019 financial results after market close on July 23, 2019. Wall Street believes the tech company will earn $0.03 for the three-months ending June 30, 2019. The eight analysts following the company have a wide range of forecasts, ranging from a loss of $0.07 to a profit of $0.22. There is a lot of room for a bearish or bullish surprise in those numbers.
Our proprietary earnings model suggests earnings-per-share profit of $0.07-$0.10, a hefty upside surprise. Last quarter, iRobot smoked earnings estimates but fell 23% the day after their first-quarter checkup – OUCH, that one really hurt.
Investors went into selling mode because revenue fell short of the consensus outlook and profit margins got squeezed by heavy investment into new products. Another issue the company is dealing with is President Trump’s Chinese tariffs, which cost the company another $5 million as many of iRobot’s products are manufactured in China. Tariffs remain the same, so they should weigh on the bottom line again, but shouldn’t negatively surprise the Street in the second quarter – baked in the cake so to speak.
In all likelihood, popping or dropping after Tuesday’s announcement will depend on sales and forward guidance. iRobot’s top line for the first quarter was $237,661,000. The consensus number for this quarter is $267,960,000, or 12.03% quarter-over-quarter growth.
According to Google Trends, web queries for iRobot Roomba were 14.38% higher in the second three-months of the year compared to the first three-months of 2019. That suggests sales could register at $271,836,652 and provide investors with a nice upside surprise for the top line.
If we’ve made the correct call that sales and earnings top the street’s outlook, then IRBT could do as it’s done in the days surrounding the last three second-quarter checkups: head higher. From the most recent Q2 announcement back, shares rose more than 13%, 17%, and 4%. However, should revenue slip again with margins eating at profits, it could be all red as the stock has done in four of the last six quarters.
Option volume the day before earnings was heavily bullish. Using all options $5 out-of-the-money for call and puts, 1,411 call options traded versus 442 put options. Open interest is closer to neutral at 1,275 on the bullish side of the tape and 1,151 on the bearish side.
In our view, our analysis suggests iRobot Corporation’s sales and profits could be better than anticipated. Considering iRobot’s popularity during Amazon’s Prime Days, forward guidance might include upward revisions for the top and bottom line. That’s usually the recipe for a pop post earnings.
If not, investors should consider adding IRBT to their portfolio on weakness, as the consumer tech industry’s long-term future is stronger than most.