Thesis bottom line
iRobot (IRBT or ‘company’) is a leader in the Robot Vacuum Cleaner (RVC) space. Economic moats include Consumer Lock-In, Patents and a Learning Curve edge – strengthened by strategic positioning.
Chip shortages, high tariff and material costs – all real concerns – have spooked investors and led to a 60% drawdown in price over the past four quarters. These headwinds raised costs and contracted margins during FY2021.
Embedded expectations in price are too bearish for time horizons exceeding 2+ years. The headwinds are external and conceivably transitory.
The last traded price of $67.85 is set for a significant revision (in 2-3 years) when chip supply recovers, and tariff concerns alleviate as factories relocate from China to Malaysia. Expected value analysis indicates a high likelihood for superior returns.
For the full memo, see link below.