Back in March, I wrote about how The Jetsons lifestyle was quickly becoming a reality.
The 1960s cartoon presented some progressive, futuristic ideas. George Jetson teleconference-called his boss from the comfort of his home, while humanoid robotic assistants ("Rosie") autonomously took care of the household chores.
Amazingly, we've reached the point where technology is allowing for those fictional inventions to come to life. Wireless internet connectivity, cloud computing, and artificial intelligence are introducing a new wave of robotics into the consumer market.
iRobot (NASDAQ:IRBT) is one company poised to sweep up those industry profits. Let's take a closer look at three reasons why.
Consumer robotics is taking off
For years, the prime customers for robots were industrial manufacturers. Robotic systems were placed on assembly lines to improve throughput, reduce costs, and maximize productivity. Managers would base decisions on economics: If the savings per unit multiplied by the volume of output covered the upfront capital costs in a reasonable payback period, they typically moved forward.
But with the price points falling significantly in recent years, robots are now becoming mass-market affordable. The Boston Consulting Group recently noted that the consumer market for robots is growing faster than expected, and is estimated to reach $23 billion globally by 2025. Three years ago, BCG analysts estimated that figure would reach $9 billion by 2025 -- this 156% upward revision indicates that they think the growing consumer market is kind of a big deal.
You don't need to travel far to see why. iRobot's Roomba vacuums now line the shelves of home improvement retailers like Lowe's and Home Depot. No longer just a novelty, consumer robots have become incredibly efficient at doing household daily chores and are receiving rave customer reviews.
The core tech is what matters
But there's more to iRobot's story than just rising consumer demand. After all, the smart home is a lucrative market -- and we should expect competitors to begin battling it out to grab their piece of the pie.
But iRobot remains a technological step ahead. The 27 year-old company's spacial awareness and navigation technology was originally used by the Department of Defense for bomb detection. The company's scientists have optimized it since then and later realized it could also be used to navigate through the doors and around the furniture of homes. Today, the Roomba has become America's best-selling vacuum.
Software will be the key for the company's expansion. Following the success of the Roomba, iRobot incorporated the spatial awareness and navigation technology into several more neat new products. The Mirra was introduced in 2013 to clean swimming pools and the Braava in 2016 to mop kitchen floors. The list of applications is growing longer, which introduces more revenue streams that can finance further research and development.
Artificial intelligence makes robots smarter
Lastly, iRobot's software itself is also getting smarter. Deep learning and neural networks are new artificial intelligence advancements that allow robots to make sense of the world around them.
As a comparison, think of Alphabet's self-driving cars. Each of them contains sensors to "see" stop signs, pedestrians, and other vehicles on the road. The cars beam up the video feeds taken by the sensors, neural networks make sense of and interpret the information, and the cars do what they should to react. It's essentially the same decision-making process humans brains were taught to go through during driver's education class ... but with a lot more data points to analyze!
iRobot's home-cleaning robots will soon be doing essentially the same thing. Machine vision sensors will allow them to instantaneously spot spills as soon as they occur, and neural networks will train them to know what a "clean" floor should look like.
How much would you pay to never again need to clean up after your messy toddler or pet? Price points are generally between $200 and $900 for iRobot products, which led nearly three million consumers last year to agree to put the company to work on managing their daily chores.
As an interested investor, I expect those three million annual unit shipments to scale up significantly. Overall revenue grew just 7% in fiscal 2016, but management has already guided for 25% growth in 2017. New customers are buying in, and the company is introducing new models and expanding the concept overseas.
I'll be keeping an eye on whether iRobot can maintain its accelerated growth rate. If consumer robotics is truly at the inflection point that BCG believes, analyst expectations are likely too low -- which could make for big future returns for the company's investors.