Why Key Analyst Sees iRobot as a Solid Buy

Canaccord Genuity is more constructive on 2016 growth prospects and raised 2016 estimates based on better Home Robot demand from Roomba 980 and signs of improving Defense business. In the near-term, the firm sees little likelihood of an increase to its fourth quarter estimates, given the high hurdle already set in order to maintain 2015 guidance. Given the recent run in the stock, Canaccord Genuity would be more aggressive buyers post the report.

As a result the firm has a Buy rating for iRobot with a price target at $40, implying an upside of 27.8% from current prices.

Last month the company announced and released its new robotic vacuum model, the Roomba 980. The 980 offers enhanced cleaning capabilities and is iRobot’s first home robot to include features that enable enhanced mapping functions. The company expects the new 980 model to contribute significantly to Home Robot revenues starting in 2016. Going forward, the enhanced mapping capabilities will allow iRobot to expand functionality for additional robotic applications within the home and further raise the bar for competitors.

Following the year-over-year revenue declines in the Defense and Security segments in each of the past few years on military spending cuts, iRobot has recently reported an uptick in large orders received from U.S. military and other organizations. Management previously highlighted a significant ramp in the Defense and Security segment to come in the fourth quarter.

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The brokerage firm noted that fourth-quarter revenue growth needed for the company to achieve 2015 guidance is substantially above growth in recent years. With macro currency headwinds still in place, Canaccord Genuity believes its fourth-quarter estimates are unlikely to be exceeded, even with better Defense contribution.

Shares of iRobot closed Monday down 0.3% at $31.30 on its 52-week trading range of $27.55 to $38.10. The stock has a consensus analyst price target of $38.13.