Shares of iRobot (IRBT) are on the verge of a major move ahead of the company’s earnings release today after the market closes.
With IRBT shares near 52-week lows, further damage and another drop below $30 could be in the works on an earnings miss. However, better-than-expected numbers could have short-sellers running for cover on a possible rebound above $35.
iRobot has topped Wall Street’s expectations in the past four quarters by $0.15, $0.06, $0.02 and $0.01, but revenue has been hit or miss. For the recently ended quarter, the suit-and-ties are looking for a profit of $0.30 a share on revenue just under $164 million. Obviously, numbers north of these levels are needed to keep shares from sinking, but guidance will be the bigger worry.
The high estimate sees iRobot earning $0.35 a share on sales of $167 million. The low estimate is at $0.26 a share on revenue of $162 million.
The company picked up some nice contracts last quarter that might not be included, and it has also been the subject of takeover talks in the past.
The IRBT February option pits are pricing in a possible 6% move in the stock. The IRBT February 34 calls (IRBT150220C00034000) and the IRBT February 30 puts (IRBT150220P00030000) could be purchased together for around $2.00.
The February options expire in 16 days and offer a great way to play a quick trade. However, the trade is risky, as shares would need to clear $36 or fall below $28 to break even on a strangle trade.
If IRBT shares stay between $34 and $30, the premiums will likely take a hit and the strangle trade could suffer steep losses.
As a directional trade, shares will need to clear $35 for the call options to do well. Shares will need to be below $29 in order for the puts to do well. If shares fail to clear $34 or fall below $30 over the next two weeks, both the calls and puts would expire worthless.
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