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Why This Analyst Cut iRobot's Price Target By $30

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Why This Analyst Cut iRobot's Price Target By $30

Analysts at Canaccord Genuity turned incrementally bearish on iRobot Corporation (NASDAQ: IRBT) after the company reported its third-quarter results. The firm's Bobby Burleson maintains a Hold rating on iRobot's stock with a price target slashed from $95 to $65, which implies zero upside potential from Wednesday's closing price of $65.11.

IRobot's earnings report indicated a "strong" performance in the U.S. and European market but was accompanied with a "disappointing" outlook in China, Burleson wrote in a research report. Specifically, revenue from the U.S. rose 34 percent year-over-year, revenue from EMEA rose 31 percent while revenue from Japan jumped 65 percent.

However, iRobot's global momentum is unlikely to continue moving forward as management's guide of 40-percent revenue growth in the U.S. (versus a prior 30-percent guide) is overshadowed by expectations in China. The company is now expecting a 25- to 30-percent decline in revenue in the country after previously estimating nominal growth.

Moreover, a lack of visibility into organic demand heading into 2018 and a growing competitive landscape creates uncertainty. In addition, the company will need to ramp spending to release new products, which is likely to limit leverage.

Finally, Burleson revised $65 price target now reflects a 21x multiple that is mostly in-line with the company's organic EPS growth expectations for next year.

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Latest Ratings for IRBT

DateFirmActionFromTo
Feb 2021CitigroupMaintainsNeutral
Feb 2021JP MorganMaintainsNeutral
Oct 2020Raymond JamesUpgradesMarket PerformOutperform

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