iRobot Shares Likely To Be Less Volatile Post-Q4 Print, Analyst Says

iRobot Corporation IRBT investors should brace for less volatility this year, according Raymond James.

The Analyst

Analyst Brian Gesuale has a Market Perform rating on iRobot.

The Thesis

iRobot shares have moved by double-digits on the day of the year-end earnings release in six of the last eight years, Gesuale said in a Monday note. The stock took, on average, 40 trading days to reclaim pre-print levels.

Analyzing the impact of tariffs on iRobot's earnings, the analyst estimates CY19 EPS could range between $2.95 and $3.77, depending on whether tariffs were set to before the ceasefire, the ceasefire is extended by 90 days or if tariffs are repealed. Depending on the tariff outcomes, iRobot shares could trade between $72 and $109 through April, the analyst said.

Gesuale pointed to the heavy short interest in the stock – 8.5 million shares shorted on a base of 28 million shares. Such a heavy short interest, according to the firm, typically adds to post-earnings volatility.

With estimates achievable following heavy negative revisions exiting Q3, and tariffs primarily impacting earnings power, short interest may be less impactful.

"It's seems intuitive to us that shares should have a much lower negative bias exiting the print given the setup of reduced expectations and heavy tariff influence that will remain unresolved until a few weeks after the print," the analyst wrote in the note.

Price Action

iRobot shares rose about 9 percent in 2018. The stock traded at $85.20 Tuesday afternoon.

Related Links:

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Photo courtesy of iRobot.