Shares of iRobot Corporation (NASDAQ:IRBT) declined 13.5% on Wednesday, after a negative analyst note overshadowed the home robotics company's better-than-expected third-quarter 2017 results.
More specifically on the latter, late yesterday iRobot announced that its third-quarter revenue had climbed 21.8% year over year to $205.4 million, which translated to adjusted earnings of $0.52 per share. Both figures easily outpaced consensus estimates for adjusted earnings of $0.47 per share on revenue of $204.5 million.
This morning, however, Piper Jaffray analyst Troy Jensen reiterated his neutral rating on iRobot stock, and reduced his per-share price target from $92 to $69.
Oddly enough, Jensen admitted that this was a "strong" quarter from iRobot. But he also expressed concerns over rising competition in the robotic-vacuum space, which still represents the vast majority of iRobot's revenue.
"While we continue to believe iRobot's product offering remains best in class, we have increasing concerns that competition is inflecting," Jensen explained. "And while we remain upbeat about the future of home robot adoption and iRobot's position in this market, we are maintaining our neutral rating."
Jensen's concerns aren't exactly new. Recall that after the stock skyrocketed to all-time highs on the heels of an equally impressive second-quarter report in July, iRobot shares dropped more than 19% last month, after short-seller Spruce Point Capital updated its long-held bearish thesis on the company to reflect the recent launch of an affordable new robotic vacuum from SharkNinja.
At the same time -- just as when Dyson announced its first robotic vacuum a few years ago -- iRobot reiterated its stance that competition is actually a good thing, as upright-vacuum specialists validate the rise of their robotic counterparts.
To be sure, iRobot co-founder and CEO Colin Angle stated yesterday: "U.S. household penetration of robotic vacuum cleaners is still less than 10%, so there is plenty of runway domestically and even more overseas. With the leading global segment share, at a time when adoption is accelerating, we are in an excellent position to capitalize on the momentum to drive future growth."
So while it's hard to blame the market for bidding iRobot stock down as Jensen revived fears of up-and-coming competition, I suspect this drop will prove to be a wonderful buying opportunity for patient, long-term investors.