Wild Swings in iRobot Stock Price

Last Updated: 29. November 2023By

The planned takeover of the pioneer of vacuum robots, iRobot, is still in the balance. Whether the deal will be successfully completed remains uncertain. In recent days, media reports have caused wild fluctuations in the iRobot share price.

iRobot, the pioneer of vacuum robots, is the undisputed leader in the household robot market. The majority of revenues (over 80%) come from the Roomba vacuum robot. The remainder is generated by complementary products, including the Scooba wet mop robot, the Braava floor mop robot, and robots for cleaning swimming pools and drains.

With a market share of up to 60% in individual markets such as the US, iRobot is still the undisputed leader in the face of increasing competition. Only in the rapidly growing Chinese market does the company lag behind its rivals.

Experts say market is far from saturated Even though iRobot is by far the largest player and has now sold over 20 million units, the market is far from saturated. At least that is the opinion of market researchers from Fortune Business Insights. They still expect significant growth in the industry. According to the analysts, the market volume could increase from 11.97 billion US dollars in 2021 to 50.65 billion US dollars in 2028. At the moment, the market is still heavily focused on North America. But robots are increasingly being used in households in Europe and Asia.

Revenues plummet in third quarter In the third quarter just past, the company had to fight against strong headwinds. In the end, revenues dropped by 36.9% to 278.2 million US dollars. This was 69.77 million US dollars lower than the analysts‘ estimates (source: Seeking Alpha). Geographically, sales in the third quarter of 2023 compared to the same period last year fell by 42% in the US, 35% in Japan and 1% in EMEA.

Profitability also suffered a significant setback
The robot specialist also had to take a decent hit in terms of profitability. iRobot recorded a quarterly loss of 79.2 million US dollars. Adjusted for one-off effects, the loss per share was 2.82 US dollars, while analysts had previously expected a loss of only 1.41 US dollars per share.

Amazon reduces purchase offer In the meantime, Amazon has reduced the originally agreed purchase price from 61 US dollars per share to 51.75 US dollars. The company cited a new credit line to finance its day-to-day business as the reason for the changed purchase price. The robot manufacturer can therefore take on another 200 million US dollars in debt. For Amazon, the lower purchase price will be „largely“ offset by iRobot’s new net debt.

Uncertainty causes wild share price fluctuations In recent days there have been significant price fluctuations in the iRobot share price. On Friday, the share price shot up by 39%, after Reuters, citing knowledgeable sources, reported that the takeover would „receive unconditional approval from the EU competition authorities“.

But now came the rollback. The European Commission apparently still has reservations about the billion-dollar acquisition of the vacuum cleaner manufacturer iRobot by Amazon. The deal could restrict competition in vacuum robots. Amazon could have the means and an interest in driving iRobot’s competitors out of the market, the EU competition regulators said on Monday evening. In addition, the online giant could deny or make it more difficult for them to access its trading platform.

iRobot share at a significant discount to takeover price This update from the competition authorities resulted in a prompt share price reaction and the papers fell by 17% on Monday. Yesterday there was a slight recovery in the share price. However, the iRobot shares are still trading at around 35 US dollars, well below the level of the Amazon offer. The European Commission now has until 14 February 2024 to make a final decision.

No wonder the share is currently trading almost 48% below the reduced takeover price. If the deal does not go through, investors‘ focus will once again turn to the company’s operational performance. As things haven’t been going too well here recently, investors should brace themselves for volatile times in this case.