Please ensure Javascript is enabled for purposes of website accessibility

Why iRobot Corporation Stock Jumped 12.6% in March

By Steve Symington - Apr 5, 2016 at 6:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The home robot maker climbed on an accelerated repurchase plan and a new floor cleaning bot.

Image source: iRobot Corporation.

What: Shares of iRobot Corporation (IRBT 4.64%) rose 12.6% in March, after the company launched a new robot and announced an accelerated share repurchase authorization.

So what: First, on March 1 -- and keeping in mind that iRobot previously increased its 2016 share repurchase authorization to $100 million in February -- iRobot announced that it had entered into an accelerated stock repurchase agreement with JPMorgan to repurchase $85 million of iRobot's common stock. At the time, iRobot also stated that it would partially fund the accelerated share repurchase with proceeds from the divestiture of its Defense & Security business unit, which incidentally closed for total proceeds of up to $45 million earlier this week (including future milestone-based contingent payments). The final settlement of transactions under the accelerated share repurchase agreement are scheduled to occur in the third quarter of 2016.

Then on March 15, shares climbed again as iRobot introduced its new Braava jet 240 Mopping Robot. With a suggested retail price starting at just $199, the Braava jet 240 should serve to not only generate incremental sales in iRobot's core United States geography, but also accelerate growth and help iRobot take share in the burgeoning China market. During iRobot's most recent quarterly conference call, CEO Colin Angle noted that earlier Braava product iterations helped fuel 70% year-over-year growth in China in 2015, thanks largely to predominantly hard floor surfaces in the region. In both cases, Braava jet should also help iRobot further diversify its revenue streams away from the Roomba robotic vacuum line, which currently generates the vast majority of iRobot sales.

Now what: Recall that the rebound also came after iRobot stock got punished as the market reacted to the company's underwhelming revenue and earnings growth for the coming year. But as I wrote at the time, Angle explained that the company is currently in the process of making strategic investments to drive diversification of Home Robot revenue over the long term. So in retrospect, it should come as no surprise that iRobot would want to repurchase its shares before that greater diversification and long-term growth becomes more evident to the broader market. What's more, it seems the Braava jet 240 is only one in a long line of new robots we should expect to see from iRobot in the coming years. So for investors willing to hold shares of iRobot and watch as that growth story unfolds, I continue to believe the financial rewards could be staggering.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

iRobot Stock Quote
iRobot
IRBT
$48.21 (4.64%) $2.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.