Investment Memo | iRobot Corporation (IRBT)

Update: As of Aug 2022, Amazon acquired iRobot.

I guess Bezos noticed what a steal iRobot was.

The thesis below is as of Jan 2022, when the firm was still listed.

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.

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