iRobot Pricing Trends Suggest Demand for Roombas Has Not Slowed
iRobot is the leading manufacturer of robotic vacuums and wet floor products in the world. Based on a modest quarter/quarter improvement in pricing trends, we believe the company experienced another strong quarter of demand for Roomba and Braava products and likely sold more robots than expected in the Mar-18 quarter. In addition, we believe the domestic robot market is one of the fastest growing robotic segments, and given iRobot’s positioning and premium tech, we expect the company to sustain 20%+ revenue growth for the next several years. While increased competition has been a growing threat to iRobot’s market share in recent quarters, we believe these threats are overblown and that the company is in position to flourish for years to come. The company reports Mar-18 quarter results on Tuesday, April 24th after-markets-close.
Strong pricing trends across entire portfolio. Over the last 3 years, we have tracked iRobot pricing across the company’s 4 largest US distributors (Best Buy, Amazon, Bed Bath & Beyond, and Target) on every Friday in the quarter. While pricing is not a perfect indicator of demand trends, price discounting has historically had a solid correlation with iRobot’s quarterly results. As displayed in the chart below, the company experienced on average higher pricing across all products we track (Roomba 980, Roomba 960, Roomba 614 Braava 380T and Braava Jet) in the Mar-18 quarter than they did in the Dec-17 quarter. We find this encouraging because we felt pricing last holiday season was strong, which translated into the company beating Dec-17 Street revenue expectations by ~$8M (or ~3%). We do want to highlight the company missed on EPS last quarter, which heavily weighed on the stock. While it is difficult to get a read on how pricing trends will directly impact the bottom line, we do know the company has historically beaten top and bottom line expectations over the last year. Given Management ability to manage expectations, we are optimistic about the upcoming quarter.
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