iRobot’s (IRBT) stock fell about 53% this year from a high of nearly $110 to a low of $52. There were a few things going on that caused the sell-off. The sell-off was triggered from a fear of competition hurting the company’s future. The selling was as sharp as it was because the stock was trading at over 40X 2018’s expected earnings at the 52-week high. So, there was the perfect storm of a stock with a premium valuation with the threat of competition.
My thesis is that the sharp sell-off brought the stock to a more reasonable valuation. I think the stock is likely to rise at a strong pace through 2018 as iRobot continues its above-average growth. Worries about competition are overdone in my opinion. iRobot is likely to maintain its leadership position for consumer robots. I expect iRobot to outperform the S&P 500 in 2018.
