Even as the artificial intelligence (AI) boom continues, some companies in the space are struggling. For iRobot (NASDAQ:IRBT), the future appears questionable at best. The company best known for producing the iconic Roomba vacuum has been trending downward for the past month, but recently, it has made three troubling announcements. To start, Amazon (NASDAQ:AMZN) has decided not to acquire the company due to regulatory concerns. But it only gets worse from there. iRobot is about to lay off more than 30% of its workers, and CEO Colin Angle is stepping down. IRBT stock has been falling today as the company’s future hangs in the balance.
When this much bad news piles up all at once, it’s hard not to be concerned about a company. But does this mean that investors should write iRobot off as a potential winner among AI stocks? Let’s take a closer look at these recent developments and assess what they are likely to mean.
What’s Happening With IRBT Stock
It should come as no surprise that IRBT stock is struggling today. As of this writing, shares are down 10%, though they have recently attempted to rally. It’s impressive that a company that has just announced three troubling things could garner any momentum. But it doesn’t change that iRobot has shed more than 60% of its value over the past month. That type of negative trajectory is hard to ignore.
While news of the acquisition falling through has tanked IRBT stock, it hasn’t impacted Amazon. AMZN stock is rising this morning. While it’s currently only up 0.18%, it’s still clear that only one of these companies has been negatively impacted by the news. After European Union (EU) regulatory agencies threatened to block the $1.4 billion acquisition on antitrust grounds, Amazon seems to have decided the benefits of owning iRobot wouldn’t be worth the cost. As Bloomberg reports:
“The decision is a sign of the intense pressure Amazon is facing to prove its actions don’t harm competition as its influence grows in retail, cloud-computing and entertainment. Antitrust regulators on both sides of the Atlantic have been keen to ensure that the biggest US tech companies don’t snap up innovative startups before they have a chance to become formidable competitors on their own.”
iRobot will receive a $94 million termination fee from Amazon, which it can put toward its restructuring plans. That said, even a cash influx pales in comparison to the boost in share prices that investors would have seen if the deal had closed. Now, the future looks more uncertain than ever as IRBT stock stumbles and shareholders consider if there is a path forward and, if so, what it may look like.
An Unclear Future
Restructuring initiatives can help a troubled company usher in a turnaround. But when a workforce reduction is paired with a CEO immediately stepping down, even contrarian investors may feel compelled to only approach the stock with caution. In the current AI boom, it’s easy to assume that the industry-wide momentum can lift the entire sector. But that doesn’t mean all AI stocks are created equal, as iRobot has proven.
Of course, it’s possible that this planned restructuring could ultimately turn things around for the struggling company. But until it starts making up some of the ground it lost over the past six months, most investors will likely be skeptical.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
