Shares of iRobot Corporation (NASDAQ: IRBT) rose 11.8% in December, according to data from S&P Global Market Intelligence, after the home robot maker received some encouraging words from Wall Street. iRobot also reached a settlement with a second competitor as part of its recent patent-enforcement efforts.
More specifically on the former, iRobot climbed after Raymond James analyst Brian Gesuale met with iRobot management, and then issued a note to clients arguing that bearish investors' recent concerns are overblown.
iRobot shares plunged in September, after a short-seller renewed what appeared to be a sensationalized attack on the company, this time highlighting the entrance of privately held SharkNinja into iRobot's niche with an affordable new robotic vacuum model. To be fair, shares fell again in late October, after Piper Jaffray analyst Troy Jensen offered more measured criticism, admitting that iRobot had just posted strong quarterly results but reducing his per-share price target on the stock because of a potential inflection in competition.
In December, according to a copy of the note, which StreetInsider obtained, Gesuale stated that after holding meetings with CFO Allison Dean, he believes that the "near-term bear thesis lacks teeth" in the areas of competition and pricing pressure. In addition, he said iRobot's business in China -- where growth has stalled as low-priced competitors abound -- should continue to improve over time.
"We can't help but marvel at the volatility in the stock, considering the performance has been relatively congruent for a single product emerging technology story that has absolutely dominated its category since inception," Gesuale added.
To that end, iRobot doesn't mind competitors as long as they fight fair. Later in December, iRobot shares continued to climb after the company announced a confidential agreement with Black & Decker through which Black & Decker agreed to discontinue sales of all home robotic vacuums for a period of time after selling through its existing inventory. This marks iRobot's second win since launching legal proceedings in April against 11 competitors over alleged patent infringement; in September, iRobot reached a similar deal with one of the component manufacturers of certain Hoover robotic vacuums.
Of course, investors shouldn't forget that iRobot stock has still climbed more than 30% for all of 2017 -- though shares also sit around 30% below their 52-week high set in late July. As it stands, iRobot investors will need to wait until its next quarterly report in early February to receive more color on its recent business performance. But in the meantime, I think they should be more than pleased with its current position.
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