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iRobot Shares Drown As SharkNinja Dips Its Fin In Robotic Vacuums

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iRobot Shares Drown As SharkNinja Dips Its Fin In Robotic Vacuums
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IRobot -3.7% on Spruce's Strong Sell (Seeking Alpha)

Shares of iRobot Corporation (NASDAQ: IRBT) were slumping on Wednesday, as SharkNinja, a household appliance maker, unveiled Shark ION ROBOT, its first automatic cleaning and charging robotic vacuum, among other products.

Amid the news, short seller Spruce Point Capital reiterated its Strong Sell rating on the shares of iRobot.

Steep Downside Likely

Spruce Point Capital had re-initiated a short position in iRobot in June, predicting 20–50-percent downside from the-then levels. The firm had made its first short recommendation for iRobot way back in May 2014, blaming it on the company's fundamental struggles, signs of channel surfing, bad governance practices and failures to penetrate the Chinese market.

After years of underperformance, the firm noted the company's sales and earnings growth reaccelerated, sending its shares higher by 300 percent since 2016. However, the firm believes the financial improvement is due to temporary factors and may not be sustainable.

See also: What Does Your Living Room Say About You? Roomba Wants To Tell Advertisers

Competitive Pressure To Squeeze

Spruce Point had then predicted that new competition will emerge and challenge iRobot's U.S. market share dominance. The firm had said then that based on its field research, it expected SharkNinja to launch a competing product at lower price points.

Delving on SharkNinja, the firm noted that it had gained market share in traditional vacuums by outselling U.K.'s Dyson. The firm also said it expected the company to partner with Ecovacs, the leader in the Chinese/Asia market, which snared significant market share from iRobot.

"SharkNinja has a proven track record of disrupting numerous home appliance markets with dynamic market strategies, and superior products," Spruce Point said.

"With 88% US market share, iRobot's share can only go down from here."

From a mere 1 percent of vacuum cleaner sales in 2008, Spruce Point noted that SharkNinja increased its U.S. market share to more than 20 percent. Thanks to a CAGR of 25 percent for its Shark vacuum cleaners and Ninja blenders, the company tripled its workforce from 250 to 800 employees.

Spruce Point had predicted then SharkNinja's laser-like-focus on the consumer and its ability to engineer a superior product at a value price point could help it to unseat market leader iRobot.

In a tweet, Spruce Capital also pointed to Bosch's entry into the making of robotic vaccum named Bosch Roxxter and stated that iRobot is now being cornered from everywhere. Electrolux AB (ADR) (OTC: ELUXY) had also launched a robotic vacuum cleaner in August.

At the time of writing, iRobot shares were slumping 11.49 percent at $89.28.

Related Link: Happy Customers, Happy ETF Investors?

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Image Credit: By Fabien Rohrer (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Latest Ratings for IRBT

DateFirmActionFromTo
Nov 2018Canaccord GenuityAssumesHoldBuy
Oct 2018NeedhamUpgradesHoldBuy
Oct 2018PiperJaffrayDowngradesOverweightNeutral

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