The stock market welcomed 2013 with a bang, as investors cheered the news of a last-minute deal in Washington to avoid the fiscal cliff. As a result, stocks climbed higher across the board. One of the top gainers was robotics maker iRobot (NASDAQ:IRBT), with shares of the company soaring 11%. Let's take a look at the challenges this futuristic company faces in the year ahead, and where the stock can go from here.
Taking a big-picture view
Many investors lost hope in iRobot last year after a series of government spending cuts hurt the company's defense business. But that's the short story. If you take a step back, another path to growth comes into view: iRobot's consumer-facing products. In fact, the Massachusetts-based company is best known for its floor-vacuuming robot, the Roomba, which has sold several million units.
Since introducing the Roomba in 2002, iRobot has gone on to create dozens of other award-winning devices for the home, and the company kicked off the new year with two new bots. The first is a pool-cleaning machine it calls the Mirra 530, which not only climbs and cleans a pool's stairs and walls, but also filters water to capture debris.
Additionally, iRobot recently launched a gutter-cleaning robot, the Looj 330. These new releases offer an excellent example of iRobot's diversified product roster, which ranges from high-end gadgets like the Mirra 530 ($1,299.99) to more affordable options like the Looj 330 ($299.99). A wide product range such as this should help iRobot expand its customer base going forward.
To the future and beyond
The market for consumer robotics is just starting to take off. Demand for home robots should be strong throughout 2013 as the technology continues to become more affordable. More than this, iRobot's market leading position in the space should create long-term profitability for the company.
Like it or not, Robots are fast becoming a critical part of various industries around the world. More companies are using robotics to make their businesses more efficient. Amazon (NASDAQ:AMZN), for example, paid $775 million last year to buy robot maker Kiva Systems. Using Kiva's robots, Amazon is now able to fulfill shipment orders faster than ever before.
Toward the end of 2012, iRobot acquired Evolution Robotics in an all-cash deal valued at $74 million. Evolution Robotics, which is best known for Mint, its floor-cleaning device, has a product mix that complements iRobot. Therefore, the acquisition should help iRobot further expand its product offerings in the home-cleaning category in the year ahead. If these new product launches achieve even a fraction of the success that iRobot's Roomba has, shareholders would be handsomely rewarded.
New markets, new opportunities
The company's push into the health care market is another potential catalyst for the stock. Together with its telemedicine partner InTouch Health, iRobot is developing new robots that allow doctors to diagnose patients in remote hospitals. The RP-VITA, or Remote Presence Virtual + Independent Telemedicine Assistant, is based on iRobot's Ava mobile robotics platform.
The portable robots enable physicians to oversee patient care remotely. This seems a prescient move, considering the global market for telepresence robots is expected to hit $13 billion by 2017, according to ABI Research.
While it may still be too soon to count iRobot's foray into health care a success, it's not altogether unlikely. Consider, for example, Intuitive Surgical (NASDAQ:ISRG). The company pioneered the use of robotics in surgery back in 1999 with its da Vinci robotic arm. Since The Motley Fool's Rule Breakers first recommended this revolutionary stock in 2005, shares of Intuitive Surgical have increased tenfold.
As we settle into 2013, iRobot and InTouch Health are hard at work getting the remote-presence automatons into hospitals and health care facilities around the world. So far these initiatives seem to be paying off. InTouch has so far sold its telepresence robots to more than 400 hospitals. Meanwhile, iRobot's Ava platform recently ranked among Information Week's "10 Medical Robots That Could Change Healthcare."
"In the next few years, thousands of service robots are expected to enter the health-care sector," according to The Wall Street Journal. iRobot is well positioned to capitalize on this trend as the company expands its market-leading position into new areas such as health care. From household droids to surgical robots, it's an exciting time for robotics makers.
I believe 2013 is iRobot's year to prove that it can not only survive without certain high-margin defense contracts, but also thrive in new markets. The health care industry looks particularly promising as service robots may help counter some of the cost pressures facing the industry.
Fool contributor Tamara Rutter owns shares of Amazon.com and iRobot. The Motley Fool recommends Amazon.com, Intuitive Surgical, and iRobot. The Motley Fool owns shares of Amazon.com and Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.