Is SharkNinja a Real Danger to iRobot?

In this segment from the Motley Fool Money radio show, host Chris Hill, Supernova and Million Dollar Portfolio's Matt Argersinger, Total Income's Ron Gross, and Motley Fool Pro and Options' Jeff Fischer consider whether the more-than-15% hit iRobot (NASDAQ: IRBT) shares took last week was reasonable in light of new competing products from SharkNinja.

A full transcript follows the video.

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This video was recorded on Sept. 15, 2017.

Chris Hill: Shares of iRobot fell more than 15% this week after appliance maker SharkNinja launched new products that will compete head-to-head with iRobot's Roomba line. God, that's a great name, SharkNinja. Matty, do you think this was an overreaction? This was a story that, when this was happening earlier in the week, we were all looking at each other saying, does anyone know what's going on with iRobot? It's not just that it fell, but it fell on very heavy trading volume.

Matt Argersinger: Right. I think it was down again on Friday, as well. This feels like an overreaction. SharkNinja has come out with a new robotic vacuum cleaner that will compete with the Roomba. But, maybe the drop in iRobot was also accelerated a bit out of a short report by Spruce Point Capital, which I hadn't heard of before, which says, "Hey, SharkNinja is a credible threat." If you don't know the Shark vacuum cleaners, they've taken a lot of share from Dyson over recent years. So, it's definitely a legitimate competitor. But the reaction to the stock, given that this is a totally new product, it hasn't even really hit the market yet, iRobot has the market share with Roomba, it seems like a bit of an overreaction. I will point out that iRobot's stock was trading for about 50 times earnings before this latest drop, so, you had the valuation argument going there, as well.

Ron Gross: Do these robots work? I know you've said you have them.

Argersinger: The bizarre thing is, I own both a Roomba and a Shark vacuum cleaner, because the Roomba is great for the once every few days, it goes around your apartment or small -- if you have one -- house and cleans it, but it doesn't get the corners, it doesn't get the tiny nooks and crannies you need to get, and you need another vacuum cleaner.

Gross: That's what I thought. Steve and I asked that. Do these work?

Hill: You sounded to me a little bit like Steve, but you also sounded like someone who might be in the market for a vacuum.

Gross: I'm in the market for not vacuuming.

Jeff Fischer: It's funny, a lot of companies now, Samsung, Dyson, are making robotic vacuum cleaners. So, that may be part of the problem -- now that robots are becoming more and more a part of our daily lexicon, competition is going to grow, and iRobot, which has had this lead for all these years, and does have all the highest-rated robotic vacuum cleaners, may see their margins have to come down.

Chris Hill has no position in any of the stocks mentioned. Jeff Fischer has no position in any of the stocks mentioned. Matthew Argersinger has no position in any of the stocks mentioned. Ron Gross has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends iRobot. The Motley Fool has a disclosure policy.