There's been a major selloff in iRobot Corporation (NASDAQ:IRBT) shares in the week since it released its quarterly report, with the stock down 21% to US$6.92. Revenues of US$193m missed forecasts by 11%, but at least statutory losses were much smaller than expected, with per-share losses of US$0.21 coming in 40% smaller than what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the three analysts covering iRobot provided consensus estimates of US$737.9m revenue in 2025, which would reflect a considerable 9.7% decline over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 61% to US$1.70. Before this earnings announcement, the analysts had been modelling revenues of US$818.0m and losses of US$1.82 per share in 2025. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The analysts have cut their price target 12% to US$11.47per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values iRobot at US$11.94 per share, while the most bearish prices it at US$11.00. This is a very narrow spread of estimates, implying either that iRobot is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would also point out that the forecast 7.9% annualised revenue decline to the end of 2025 is roughly in line with the historical trend, which saw revenues shrink 8.4% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.8% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect iRobot to suffer worse than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for iRobot going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with iRobot (at least 2 which shouldn't be ignored) , and understanding these should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
