Shares of iRobot (NASDAQ:IRBT) fell as much as 11% early Wednesday before recovering to trade down 5.8% as of 1:30 p.m. EDT after a notable analyst downgrade.
Raymond James' Brian Gesuale lowered his rating on iRobot stock to underperform from market perform. To justify his relative bearishness, Gesuale argues that Wall Street's consensus estimates aren't accounting for potential market-share losses in the coming quarters as competition increases in the robotic vacuum cleaner (RVC) market. In particular, he's concerned about competitively priced RVCs from recent market entrant Shark, which could hurt iRobot's brand and pricing power from the upcoming holiday season and into 2020.
It's no mystery iRobot's flagship Roomba line has had to deal with a massive influx of competitors. Though the company still commanded an impressive 52% of the premium RVC segment in dollar terms in 2018, that figure was down from around 62% the previous year as competition ramped up.
Still, iRobot management most recently told investors it anticipates growing revenue 10% to 14% year over year in 2019, to a range of $1.20 billion to $1.25 billion. So even if it's losing market share now, it's still able to continue growing at a reasonably fast clip.
In his downgrade today, however, Gesuale said he anticipates iRobot's revenue to climb modestly to $1.27 billion in 2020, translating to earnings of $2.40 per share. Both figures are well below Wall Street's consensus estimates for 2020 earnings of $3.09 per share on revenue closer to $1.36 billion.