With iRobot Corporation (NASDAQ:IRBT) shares up more than 150% since August of last year, I can only assume that anyone who bought Fitbit Inc (NYSE:FIT), GoPro Inc (NASDAQ:GPRO) and Twitter Inc (NYSE:TWTR) decided IRBT stock was the next best way to burn their cash.
All jokes aside, one has to give credit where it’s due. Unlike GPRO, TWTR and FIT, IRBT stock is at least consistently profitable. There are crazier things to do with your cash.
Still, it’s difficult to call this run in iRobot stock anything other than just-another hype bubble.
You know the company even if you don’t know you know the company. iRobot is the name behind the popular Roomba cleaning robots. Just turn it on, and the disc-shaped vacuum cleaner finds its way around your house all on its own.
They’re not robots in the sense we think of Star Wars’ C3PO as being a robot, but technically speaking, it’s a robot in the sense that it autonomously performs a function that requires it to think.
Click to Enlarge It’s a fine company. Sales and profits have been (mostly) growing, which is more than some companies can say for themselves. The recent runup from IRBT, however, is remarkable in that the stock really hadn’t made any net forward progress since its 2006 initial public offering until September of last year. Then it took flight. What gives?
Broadly speaking, that’s when things started to collectively click with traders. We found out why in October. Not only did the company report third-quarter numbers that topped expectations, iRobot upped its full-year profit guidance. Three months later, it topped its Q4 expectations, and the glass has been half-full for most onlookers ever since.
Not every onlooker, though. Case in point: In February, Morningstar analyst Denise Molina dared to go against the grain and suggest IRBT stock was overvalued. Molina was also concerned about thin margins and the growing amount of competition that had already eaten into the company’s market share (down from 90% in 2009 to 60% as of the end of 2016).
IRobot shares even pulled back on the news, albeit temporarily. It just wouldn’t stay down, though. Investors were too excited about what the Motley Fool’s Daniel Sparks described as the “explosion phase” for cleaning robots. The new app iRobot published in March that connected its robots to the cloud only underscored this idea.
Still, 155% in ten months?
Cleaning robots are here to stay, no doubt. But let’s call a spade a spade … this rally isn’t merited.
You can’t entirely blame investors. You buy a stock for where the company is going rather than where it’s been; and to the extent one can gauge the future, it seems as if where iRobot is going is somewhere compelling. The trouble is, the optimism surrounding iRobot now tastes a lot like the optimism surrounding the aforementioned Twitter, GoPro and Fitbit when the table-pounding bullishness for each of those names was at its peak.