What happened

Shares of iRobot (NASDAQ:IRBT) fell 15.4% in August, according to data from S&P Global Market Intelligence, extending its post-earnings plunge from July as some analysts worried over the increasing competition in the robotic vacuum cleaner segment.

Investors may recall that iRobot stock was already under pressure before the month started. Shares plunged 20% in a single day on July 24, when the company delivered strong second-quarter results but reduced its full-year financial guidance due to concerns that the U.S.-China trade war could hamper growth for the broader home-robotics market.

So what

That negative momentum carried forward as trade tensions persisted, leaving iRobot stock to drift lower for the first few weeks of August. But its declines accelerated on Aug. 22, when JPMorgan analyst Mark Strouse reiterated his neutral rating on iRobot stock. At the time, he pointed out that the website of iRobot competitor Shark had been updated with details on a "soon-to-be-released" robotic vacuum that includes many of the same features as iRobot's Roomba i7 model at a much lower price.

Roomba i7 with clean base and smartphone with iRobot's HOME app open.


Now what

To be fair, iRobot's self-cleaning i7 model was released just over a year ago, and has since been displaced from the company's top-of-the-line slot by the newer, massively upgraded Roomba s9+. What's more, iRobot has managed to deliver growth while maintaining a majority share of the robotic vacuum market in recent years, despite drastically increased competition -- and that includes previous affordable alternatives presented by Shark, since the vacuum-industry giant entered the niche in late 2017. And that's doesn't even factor in iRobot's opportunities to expand its reach into new product lines, most notably with the impending commercial launch of its new Terra lawnmower next year.

Given today's macroeconomic uncertainty and iRobot's cautious comments about its near-term growth outlook, it's no surprise that concerned investors are amplifying the stock's recent losses. As a patient, long-term shareholder in the company myself, I still think iRobot holds tremendous potential, and view it as a top stock to buy for investors willing to watch its growth story play out in the coming years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.