Susquehanna Financial Group analysts Meghna Ladha and James E Friedman maintain a Positive rating for iRobot Corporation (NASDAQ:IRBT) as the robotic company announce its financial results.

iRobot Corporation

Roomba 880 launch in U.S. and international markets, strength in APAC and recovery in Europe should continue to support iRobot Corporation (NASDAQ:IRBT)’s growth momentum in 2014. We maintain our Positive rating and $40 price target.

iRobot Corporation (IRBT) earnings highlights

  • 4Q revenue of $126.3 mln was modestly above our estimate; EPS beat by 2 cents at $0.11.
  • 2014 guidance contemplates $560-$570 mln (15-17% Y/Y growth) in net revenue and EPS of $1.00-$1.15 (consensus at $1.11).
  • Total home robot revenue increased 30.6% in 4Q and is expected to contribute $500-$515 mln in revenue (17-20% growth) in 2014.
  • Domestic Home robot revenue increased 50% in 4Q thanks primarily to new product sales. International home robot revenue increased 18% with weakness in Europe offset by strength in APAC.
  • iRobot Corporation (NASDAQ:IRBT) is seeing signs of recovery in Europe as macroeconomic headwinds subside and new products are rolled out (Braava).
  • China contributed <$10 mln in revs in 2013.
  • Next generation Roomba launch (800 series) has performed above expectations to date and the Scooba 450 is expected to roll out to new geographies in 2014.
  • Reiterated long-term guidance through 2016 of mid-high teens revenue growth.

Catalysts

New distribution channels for home robots; Roomba 880 launch in stores in 1Q.

Downside risk for iRobot

Our downside risk of $33 is based on ~23x our forward EPS estimate, essentially in-line with its growth rate. We believe the stock could test such a level should iRobot Corporation (NASDAQ:IRBT) lose its leading position and fail to maintain double-digit growth in the home care robot segment. Additionally, a less effective S&M and slower product upgrade cycle could negatively impact profitability.