There's no denying that iRobot (NASDAQ: IRBT) took investors on a wild ride in 2017. The home robotics specialist ultimately closed up more than 30% for the full year -- but not before being knocked down multiple times as short-sellers highlighted concerns over rising competition and pricing pressure.
But if iRobot's recent guidance and comments from industry watchers are any indication, the company could be poised to deliver even greater gains in 2018.
With shares climbing almost 12% in the month of December alone, iRobot already has positive momentum on its side. For that, iRobot can thank a combination of its latest patent-enforcement win -- a deal through which Black & Decker agreed to discontinue sales of all home robotic vacuums after selling through its remaining inventory -- and a note from Raymond James analyst Brian Gesuale indicating that, after meetings with iRobot management last month, it's evident the "near-term bear thesis lacks teeth."
An "exceptional" holiday season
Earlier this week, however, Piper Jaffray analyst Troy Jensen added fuel to iRobot's fire with another encouraging update. More specifically, Jensen voiced his belief that the robotic vacuum market enjoyed "exceptionally" strong demand during the holiday season, citing channel checks that showed price increases on Amazon.com and out-of-stock retailers. As such, Jensen thinks iRobot is poised to exceed Wall Street's expectations for the fourth quarter.
And that's not to say those expectations are low. Despite strong sell-in during the third quarter in anticipation of meeting holiday demand, iRobot management predicts continued strong sales will lead to a record fourth quarter. Consensus estimates call for iRobot's revenue to jump more than 49% year over year to $317.3 million, which should translate to earnings of $0.24 per share.
Of course, barring an update from management in the meantime, we won't know for sure whether iRobot beats those expectations until its final fourth-quarter results are released early next month. But the confluence of recent positive events and opinions certainly seems to bode well for its chances of doing just that.
Not so fast?
That said, investors should also remember that Jensen's cautious optimism was part of the reason iRobot shares fell after its third-quarter report in late October -- and this despite the fact that iRobot increased its full-year guidance when those results handily beat expectations.
Jensen even admitted as much at the time, calling it a "strong" quarter and insisting his firm remains "upbeat about the future of home robot adoption and iRobot's position in this market." But he also simultaneously reiterated his neutral rating on iRobot stock, and reduced his per-share price target from $92 to $69 -- both figures he reaffirmed this week in his latest note. To justify that initial reduction, however, he expressed worries that "competition is inflecting." In the minds of more skittish investors, this helped effectively validate the more sensationalized versions of those concerns voiced in separate short-sellers' reports.
As such, whether iRobot stock pops after releasing its holiday-quarter results next month will likely depend on a combination of the gravity of its beat relative to consensus estimates, and the company's expectations for the coming year. But if iRobot's holiday performance is "exceptional" enough to silence its critics, the performance of its stock should follow suit.
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