iRobot Investors Clean Up After Q4 Results

Demand And Low Inventory Drive iRobot Results

iRobot’s (NASDAQ:IRBT) Q4 performance has helped gel an idea we’ve been kicking around. The idea is that demand for consumer goods has been so strong that, when coupled with widespread manufacturing shut-downs, store shelves are wiped out of many products. This situation is leading to a massive surge of production across most verticals that can be seen in the earnings results.

Freshpet is only one example. From N.C. to Florida at least, the reports are the same, Freshpet’s refrigerators are nearly empty all of the time because demand is that high. Freshpet reports earnings on February 22nd and we expect it to be a very good report.

And the same is true for iRobot. Store shelves are clear of most iRobot products and that is doing two things. The first thing it’s doing is driving a push to higher-pricepoint premium products. The second is a shift to eCommerce with the thought “if I can’t get one locally I’ll go straight to the source”.

iRobot Blows Past The Consensus, Guides Higher

iRobot delivered good results on so many levels it’s hard to know where to start. Because the company beat its own already aggressive guidance that is a good place. Moving on from there, the $544.83 million is not only better than the company expected, it is up 27.7% from last year and 1100 basis points above the analysts consensus. The strength is driven by both sales of premium robots and eCommerce which are up 55% and 70% respectively. In terms of the gross, eCommerce accounted for 60% of the revenue. On a regional basis, sales gains were led by the x-U.S. category with a 39% increase in Japan and 26% gain in Emerging Markets, Europe, and Africa.

Moving down the report the company’s gross margins shrank on a YOY and that is a concern. Margins shrank due to higher costs related to the pandemic and rising freight costs. The mitigating factor is that sales outpaced costs by a significant amount nearly negating the impact on earnings. On the bottom line, the GAAP $0.46 beat the consensus by $0.39 while the adjusted $0.84 beat by $0.53.

"Solid demand combined with excellent collaboration and execution among our sales, marketing and operations teams and our broader supply chain enabled us to grow fourth-quarter revenue in excess of 25% in each major geographic region. We converted this top-line performance into increased operating income and EPS,” said Colin Angle, chairman, and chief executive officer of iRobot.

And that’s not all. The company elected to give guidance for the coming year and the guidance is good. Management is expecting YOY revenue growth in the low to mid-teens and EPS to nearly double. The $1.65 to $1.67 billion in expected revenue compares well against the $1.48 consensus as does the earnings. The EPS was guided in the range of $3.00 to $3.25 versus a $2.34 consensus.

The Technical Outlook: iRobot Pops, Buy On Weakness

Shares of iRobot made a 15% pop a week or two before the Q4 release due to short-coverging. The stock came into the sights of the Reddit Warriors and the shorts ran for cover. Now, with price action receding to more attractive levels, it is almost time for investors to buy in.

iRobot has already received a number of nods from the analysts including an upgrade from J.P. Morgan. The analysts at JPM are “impressed” with iRobot’s execution and upgraded the stock to Overweight from Neutral.The caveat for investors is that there is still a significant resistant line to be crossed. If the $140 level is broken and confirmed as new support we’d be buyers. If not then there is a chance price action could pull back and possibly down to the $100 level before a solid base can be formed.