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Tariff-Driven Pullback In iRobot Overdone, Needham Says In Upgrade

Tariff-Driven Pullback In iRobot Overdone, Needham Says In Upgrade

Shares of iRobot Corporation (NASDAQ: IRBT) are reeling after the company announced it will see a negative tariff impact of around $5 million in the fourth quarter.

The Analyst 

Needham analyst James Ricchuti upgraded iRobot from Hold to Buy and set a $95 price target.

The Thesis:

The Roomba vacuum manufacturer reported a third-quarter sales beat Tuesday and raised 2018 EPS and sales guidance, but it was management's decision not to pass along added costs to U.S. retailers and consumers from the 10-percent tariffs imposed Sept. 24 that is likely weighing on stock, Ricchuti said in a Wednesday upgrade note. (See the analyst's track record here.) 

“We expect the increased tariffs to put a moderate pressure on the strong [robotic vacuum cleaner] category. And we are working to align our product mix and pricing with key retailers to maintain our momentum in the segment," iRobot Chairman and CEO Colin Angle said on the Q3 earnings call.

"Longer-term, we will continue to look for cost reduction opportunities to help mitigate the impacts on prices, margin and the long-term growth of the segment,”

Ricchuti said that while iRobot "blew away" EPS in Q3, tariffs will take a "hefty bite" out of its Q4 earnings. Tariffs could potentially reach 25 percent at the turn of the year, but Ricchuti said the company appears to have a variety of options to partially mitigate the impact of tariffs.

“We are factoring in the impact of the 10-percent tariff in our revised 2019 estimates, and believe the company almost certainly will not bear the full brunt of the tariffs as of Jan. 1."

The pullback in iRobot shares is overdone, and the company is seeing robust demand for its products in the U.S., leading him to upgrade the stock, accoridng to Needham. 

Price Action:

Shares of iRobot were trading down 12 percent at $80.79 at the time of publication Wednesday. 

Related Links:

Can Amazon Sweep Away iRobot's Dominant Positioning With Its Own Home Robots?

Raymond James: iRobot Shares Reflect A More Balanced Risk-Reward Trade-Off

Photo courtesy of iRobot. 

Latest Ratings for IRBT

Oct 2019MaintainsNeutral
Oct 2019DowngradesMarket PerformUnderperform
Sep 2019Initiates Coverage OnBuy

View More Analyst Ratings for IRBT
View the Latest Analyst Ratings

Posted-In: James RiccuhtiAnalyst Color Earnings News Guidance Upgrades Price Target Analyst Ratings Best of Benzinga


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