Why iRobot Stock Broke Down

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of iRobot (NASDAQ: IRBT  ) were shorting out today, dropping as much 11% after its fourth-quarter-earnings report missed the mark.

So what: The maker of household and security-related robots said earnings per share fell from $0.54 a year ago, to $0.26, as all-around operating expenses increased significantly, though that was slightly ahead of estimates at $0.24. Revenues, however, fell 1.5%, to $124.5 million, missing estimates at $127.3 million. Though sales growth was essentially flat, CEO Colin Angle noted strong growth in the home robot business, which increased 16% over a year ago due to heavy adoption in Japan. Sales in the defense and security segment declined, in part, due to the government shutdown.

Now what: iRobot lowered the top end of its full-year revenue guidance to $490 million, from $495 million, and now expects sales of $485 million-$490 million. It also adjusted its EPS guidance from $0.88-$1.00, to $0.90-$0.95, and both projections were below analyst estimates of $492 million in revenue and $0.98 EPS. For a stock with a P/E of 38, growth seems to be coming awfully slowly. While its technology gives it a unique position in the market, the stock may a bit overvalued at this point, especially since shares had doubled from the end of the last year.

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  • Report this Comment On October 24, 2013, at 2:20 PM, NEALWF wrote:

    what drop? P/E is for classical established companies. P/E goes out the window for companies that show possibilities of potential like FB or AMZN or GOOG in the early days. This is where real investor intuitition comes to play. Instead of analyzing numbers and charts you need to actually pay attention to thier product/service that they produce/offer. Is it a game changer? what will thier market look like when it matures? how big could it be?

    I find to often these new investors ignore the core fundamental question. Companies is in business to make money (hopefully) and to do that they sell a product or service that is valued by the public, that product or service is the center of everything and is where all analysis should begin, the majority for some reason seems to neglect to properly research that aspect.

  • Report this Comment On October 24, 2013, at 5:38 PM, Helmut wrote:

    I agree with NEALWF in looking at the big picture of a young company. But technicals are so much easier to quantify and evaluate then the intuitive, gut feelings.

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