Why iRobot Stock Lost 23.4% in February

What happened

iRobot (NASDAQ: IRBT) stock lost 23.4% in February, according to data provided by S&P Global Market Intelligence. Disappointing fiscal-year guidance appears to have been the biggest impetus for the sell-offs.

So what

iRobot reported fourth-quarter earnings results and issued guidance for the current fiscal year on Feb. 7. Sales for the period climbed 53.8% year over year to reach $326.9 million, and earnings per share (EPS) came in at $0.16 (down from $0.49 in the fourth quarter of 2016) despite a $0.41-per-share impairment charge related to the new tax law. Sales and earnings for the period came in substantially above the average analyst estimates, but the company's guidance for EPS between $2.10 and $2.35 in 2018 fell short of Wall Street's expectations of $2.70 per share for the fiscal year.

Shares plunged 32% the day of the earnings report and conference call. They have since somewhat rebounded, but are still down more than 20% following the tepid guidance.

Now what

With north of 60% market share in robotic vacuum cleaners, iRobot is a leader in the home robotics space. That's a product category that's on track to see substantial growth over the long term. The company also has growth opportunities in floor-mopping robot and other categories, but will need to contend with an influx of competitors.

iRobot is ramping up its marketing and product development initiatives in order to take advantage of its market position and fend off rivals -- a move that explains why earnings guidance fell short of the market's expectations despite projected sales being higher than estimated. It's also worth keeping in mind that the company has typically been conservative with its earnings guidance.

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Keith Noonan 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.