Stock Analysis On Futuristic Trends

iRobot will ride the Robotics Trend in 2014



For the upcoming 2014 International CES tradeshow in Las Vegas, CES has published five technological trends to keep watch for in the coming year.   Some trends include digital health care, self-driving cars and the surging robotics trend.   One firm that is poised to continue taking advantage of this emerging robotics trend is iRobot (IRBT)

iRobot’s recent third-quarter results were in line with expectations.  One highlight was the 16% increase in home robot revenue over the same annual period in 2012 thanks to a strong effort in Japan.    Additionally, plans are in work for a next generation home robot for the current quarter.   Defense and Security Revenue declined by over 17 million dollars thanks mostly to the U.S government shutdown.   Domestically, the U.S government shutdown caused iRobot’s defense and security revenue to decline by 23 million dollars.   This dragged the firm’s net income down to just over 7.8 million dollars.  This total was nearly half of its total net income for the same period one year ago.

In spite of this, iRobot has still managed to post a higher net income and revenue than it has in the first nine months of 2012.   In addition, iRobot posts strong fundamentals with a current ratio of 3.73 and a quick ratio of 2.73.  In addition, iRobot lacks leverage with a debt ratio just over 20% and a low debt-to-equity ratio of 0.25.  These statistics are according to its latest third-quarter 10-Q results.

Yet, it appears that iRobot’s success going forward will not only depend on it sales, but on the future success of the robotics trend.

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On December 17th, iRobot’s shares jumped as much as 23% after Google (GOOG) announced that it had acquired a robotics firm by the name of Boston Dynamics for an undisclosed sum.  Boston Dynamics has become a Youtube sensation with its demonstrations of its robots such as Big Dog, Atlas, Cheetah and Wildcat.   This marked Google’s eighth acquisition of a robotics firm in 2013.   One of Google’s recent acquisitions was a Japanese robotics firm by the name of Schaft.  One of Schaft’s robots easily won the Darpa Robotics Challenge Trials in Miami.  Given that DARPA is the defensive research segment of the U.S defense department,  this was a huge win that gave greater legitimacy to Google’s shopping spree of robotics firms.

Of course, it is general knowledge that Amazon (AMZN) dove head-first into the robotics trend.  In a widely publicized appearance on 60 Minutes, Jeff Bezos discussed the planned release of Amazon Prime Air in the year 2015 pending approval from the FAA.   The key to this upcoming product service is the use of robot delivery drones.     Last year, Amazon purchased a robotics manufacturer by the name of Kiva Systems for $775 million in order to help optimize its warehouse production in their midst of their warehouse expansion strategy.   Kiva Systems builds robots to help retailers in terms of inventory and order fulfillments.

This year, Apple Inc. (AAPL) is planning to invest most of its 10.5 billion in CAPEX on assembly robots that will insist in iPhone, iPad and Macbook production.  Reportedly, this move is a response to Samsung’s surging momentum in the electronics platform.

iRobot was upgraded by analysts to a “Strong Buy” following Google’s purchase of Boston Dynamics.  Yet, another reason for the  analyst upgrade was the projected success of the Roomba 800.      Additionally, analysts predicted that the Braava robotic mop as well as iRobot’s expansion into China will add $100 million dollars in revenue in the next three years.  iRobot was given a price target of $39.

iRobot = Buy! Buy! Buy!

Given that the robotics trend is set to hit its stride this year, iRobot will be one stock poised to take full advantage.  The Defense and Security revenue segment of iRobot will definitely improve in the 4th quarter without a government shutdown to deal with.   Thus, iRobot’s bottom line will receive a dramatic increase consequently.

Investors should definitely institute a buy position on iRobot.  Don’t be surprised if the stock price goes well past $39.



5 Responses to “iRobot will ride the Robotics Trend in 2014”

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