iRobot Corporation (NASDAQ:IRBT) Just Reported And Analysts Have Been Cutting Their Estimates

Shareholders in iRobot Corporation (NASDAQ:IRBT) had a terrible week, as shares crashed 25% to US$7.64 in the week since its latest second-quarter results. iRobot reported revenues of US$166m, in line with expectations, but it unfortunately also reported (statutory) losses of US$2.41 per share, which were slightly larger than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on iRobot after the latest results.

View our latest analysis for iRobot

Taking into account the latest results, the current consensus, from the three analysts covering iRobot, is for revenues of US$774.3m in 2024. This implies a perceptible 4.4% reduction in iRobot's revenue over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 58% to US$2.82. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$838.9m and losses of US$2.64 per share in 2024. So it's pretty clear consensus is more negative on iRobot after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a moderate increase in per-share loss expectations.

The consensus price target fell 7.4% to US$12.97, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values iRobot at US$14.00 per share, while the most bearish prices it at US$11.94. This is a very narrow spread of estimates, implying either that iRobot is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 6.1% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 8.6% decline in revenue until the end of 2024. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 5.8% annually. So while a broad number of companies are forecast to grow, unfortunately iRobot is expected to see its revenue affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for iRobot going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 5 warning signs for iRobot (2 shouldn't be ignored!) that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.