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Canaccord Downgrades iRobot After Rally, Says Robot Lawnmower, Tariffs Are Risks

Canaccord Downgrades iRobot After Rally, Says Robot Lawnmower, Tariffs Are Risks

Roomba maker iRobot Corporation (NASDAQ: IRBT) stock was downgraded by Cannacord Genuity following a run-up in price that may have the stock overvalued amid concerns about tariffs and the marketing of a new robotic lawn mower.

The Analyst

Cannacord Genuity’s Jed Dorsheimer downgraded iRobot from Buy to Hold and lowered the price target by $1 to $114.

The Thesis

Dorsheimer said iRobot’s new Terra robot mower is exciting, but the company’s success with new products in the past has been mixed.

The Terra is in a different category than iRobot's better-known indoor cleaning robots Roomba and Braava, which could make it necessary to spend more on marketing to get customers familiar with the Terra, the analyst said. 

Tariff Fears 

The company uses Chinese manufacturers, which raises tariff concerns, Dorsheimer said. If higher tariffs go into effect, iRobot has said it will adjust its product prices accordingly, he said.

That could be a threat to Wall Street's earnings estimates for iRobot, the analyst said.  

Some of the concern comes from the strength in the stock, Dorsheimer said. Shares have risen in recent months, and the analyst attributes the move to better than-expected fourth-quarter earnings, the Terra announcement and high short interest.

The company is interested in using the home-mapping data that its robot vacuums create for broader internet-of-things applications, Dorsheimer said, adding that it's not yet clear how iRobot intends to monetize its networking capabilities. 

“We would look to become more constructive on IRBT shares at a more compelling valuation, or as we see the above points becoming derisked." 

Price Action

Shares of iRobot were up 0.22 percent at $119.65 at the time of publication Tuesday. 

Related Links:

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

Roomba Maker iRobot No Longer A Buy After 2018 Rally, Tariff Worries, Piper Jaffray Says In Downgrade

Photo courtesy of iRobot. 

Latest Ratings for IRBT

Jul 2020Colliers SecuritiesDowngradesBuyNeutral
Jun 2020B of A SecuritiesDowngradesNeutralUnderperform
Jun 2020Piper SandlerMaintainsNeutral

View More Analyst Ratings for IRBT
View the Latest Analyst Ratings


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