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Why I’ll be looking at iRobot Stock next week

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Why I’ll be looking at iRobot Stock next week

i robot (NASDAQ:IRBT) has some big questions for investors to answer over the coming week. The robotic cleaning device specialist made Wall Street nervous in its latest earnings report, which showed net losses combined with declining sales volumes.

These operating trends may have improved in the second quarter, thanks to the lifting of Chinese tariffs and the potential stabilization of demand for vacuum cleaners. Investors will be watching closely for signs of a return to steady growth in sales and earnings in the second half of the year.

Let’s review the main metrics to watch on Wednesday August 10th.

Sales trends

Most investors following the stock expect sales to fall about 14% to $303 million. Keep in mind, however, that this comparison will be affected by the surge in demand a year ago, when pandemic shutdowns and federal stimulus payments boosted sales. Revenue is expected to increase further from the pre-pandemic period in the second quarter of 2019, which was $280 million.

Looking deeper into sales trends, iRobot revealed modest declines in global sales in early May, thanks in part to solid demand in the US and Japanese markets. But inflation, combined with the war in Ukraine, caused a slump in the European segment. A key question for the second quarter is whether iRobot is still experiencing relative strength in these markets.

Keep an eye on the balance between prices and sales volumes. iRobot raised prices but suffered lower unit volumes in the first quarter. If the company cannot develop both metrics, it may not generate stable revenue for the whole of 2022.

Better income

iRobot beat management’s profit forecast last quarter, although net losses were significant. The company is benefiting from the lifting of tariffs on its Chinese imports which should, with the help of higher prices, start to boost its profits in the second half of the year.

The company still has a long way to go before hitting double-digit targets operating profit margin investors saw recently at the start of 2021. After all, profitability fell into negative territory last quarter and is unlikely to recover quickly in the second quarter as sales remain under pressure.

But shareholders are hopeful CEO Colin Angle and his team can show progress on that, given they promised to “preserve our profitability” in early May.

Look forward

The volatile consumer and geopolitical environment could force executives to issue a wide range outlook for the remainder of 2022. In this week’s report, this forecast calls for sales to increase between $1.64 billion and $1.74 billion, compared to $1.6 billion last year and $1.4 billion. in 2020. As a result, reported earnings could range between a profit of $0.23 per share and a loss of $0.37 per share.

Investors hope to gain more clarity on Wednesday, including a narrower forecast range for these key growth metrics. In the meantime, we will have to wait for the third quarter report to get answers to the key question of consumer and retailer demand as the holiday shopping season approaches.

This week’s announcement will contain clues on this subject, but iRobot’s broader performance in 2022 will likely depend on consumer trends that are not yet known.

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Demitri Kalogeropoulos has no position in the stocks mentioned. The Motley Fool holds positions and recommends iRobot. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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