iRobot: Undervalued Amid Global Chip Shortage
Updated
Related News: "Bad decisions, bad luck, and then increased demand" has led to a global semiconductor shortage, with the bad luck being the covid 19 pandemic closing down the only factories that made chips, and the increased demand being bored children who want a new iPhone 12 to pass time during quarantine.
How iRobot is Affected: iRobot needs semiconductors to make their Roomba vacuum cleaners. The global chip shortage is reducing the amount of vacuums they can produce, which leads to lower gross revenue and makes the business seem more unattractive to outside investors.
Fundamental Analysis: A PE (price to earnings) ratio of 20.48 and a PB (price to book) ratio of 2.86 indicates this company is still modestly valued, despite the recent 60% selloff from its all time high of 196$. A current ratio of 2.90 and a DE (debt to equity) ratio of 0 shows iRobot can easily pay off any debt it may have. Sales over the past five years have increased by 18.30% annually, and iRobots EPS (earnings per share) has increased by 28.50% annually, leading me to believe this is a fast growing company. ROE (return on equity) is 13.90% as well. All in all, everything is good with iRobots balance sheet, at least for now. In the future, however, the company has stated that revenue, net profit, and eps will not be in line with past predictions; the chip shortage will temporarily reduce profits and gross revenue, although next year will be better as the semiconductor situation gets under control. iRobot also said it plans to repurchase 100 million dollars worth of shares under an accelerated share repurchasing agreement next month, which means a slight increase in stock prices in the shorter term.
Technical Analysis: iRobot has been in a downtrend for the past six-seven months, which provides an opportunity to buy the dip (my favorite term)! My proposed buying range is between 60-70$, as it has not yet been established how long this downtrend will continue. 60-70$ is an area with many key supports, which makes it a good place to enter into a then undervalued stock. My first price target is 100$ by December of next year. The semiconductor situation will have been resolved by then, and it is likely more outside investors will be interested in iRobot when the money starts flowing. My second price target is 132$ by August of 2023. iRobot will have completely recovered and should continue to grow at a fast pace, resulting in a higher stock price than in previous years.
Personal Opinion: Honestly, I believe iRobot will survive the semiconductor shortage and do well in the next two to three years. It has the fundamentals, the buyback plan, the temporarily adverse market conditions to make the stock a bargain, and the strong support levels that provide a place to park my money. Everything is there; and I won't miss this opportunity like I missed bitcoin at 10k (damn it).
***Diamond hands to you all---and also, this is not actual financial advice. You can follow it, of course, but I'm not a financial advisor, nor am I a guru or an old hag with a magic mirror; I do this for fun, and to improve my personal trading. Link is down below to my Alibaba idea, where I dive into why this Chinese tech stock has the potential to provide some massive returns.***
How iRobot is Affected: iRobot needs semiconductors to make their Roomba vacuum cleaners. The global chip shortage is reducing the amount of vacuums they can produce, which leads to lower gross revenue and makes the business seem more unattractive to outside investors.
Fundamental Analysis: A PE (price to earnings) ratio of 20.48 and a PB (price to book) ratio of 2.86 indicates this company is still modestly valued, despite the recent 60% selloff from its all time high of 196$. A current ratio of 2.90 and a DE (debt to equity) ratio of 0 shows iRobot can easily pay off any debt it may have. Sales over the past five years have increased by 18.30% annually, and iRobots EPS (earnings per share) has increased by 28.50% annually, leading me to believe this is a fast growing company. ROE (return on equity) is 13.90% as well. All in all, everything is good with iRobots balance sheet, at least for now. In the future, however, the company has stated that revenue, net profit, and eps will not be in line with past predictions; the chip shortage will temporarily reduce profits and gross revenue, although next year will be better as the semiconductor situation gets under control. iRobot also said it plans to repurchase 100 million dollars worth of shares under an accelerated share repurchasing agreement next month, which means a slight increase in stock prices in the shorter term.
Technical Analysis: iRobot has been in a downtrend for the past six-seven months, which provides an opportunity to buy the dip (my favorite term)! My proposed buying range is between 60-70$, as it has not yet been established how long this downtrend will continue. 60-70$ is an area with many key supports, which makes it a good place to enter into a then undervalued stock. My first price target is 100$ by December of next year. The semiconductor situation will have been resolved by then, and it is likely more outside investors will be interested in iRobot when the money starts flowing. My second price target is 132$ by August of 2023. iRobot will have completely recovered and should continue to grow at a fast pace, resulting in a higher stock price than in previous years.
Personal Opinion: Honestly, I believe iRobot will survive the semiconductor shortage and do well in the next two to three years. It has the fundamentals, the buyback plan, the temporarily adverse market conditions to make the stock a bargain, and the strong support levels that provide a place to park my money. Everything is there; and I won't miss this opportunity like I missed bitcoin at 10k (damn it).
***Diamond hands to you all---and also, this is not actual financial advice. You can follow it, of course, but I'm not a financial advisor, nor am I a guru or an old hag with a magic mirror; I do this for fun, and to improve my personal trading. Link is down below to my Alibaba idea, where I dive into why this Chinese tech stock has the potential to provide some massive returns.***
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