The Biggest Challenge Facing iRobot Stock

It would be fair to say that iRobot Corporation (NASDAQ: IRBT) has executed flawlessly over the last 12 months. Margins have improved, the company has held onto its dominant market share, it has soundly beaten earnings estimates four quarters in a row, and the stock price is up 156%. The key question for investors is whether or not this impressive performance can continue. Let's explore the challenges facing iRobot going forward, and while there are various problems, they will all, in one way or another, relate to one word. Competition.

iRobot robotic vacuum: Image by author

In a way, all of iRobot's competitors in the robotic vacuum market are small competitors. At least they are small compared to iRobot. As of this writing, iRobot has over six times the market share of its nearest competitor. The competitors that are relatively small as companies include bObsweep, ILife, Dyson, Neato Robotics, Anker, and Ecovacs. Of those on the list, Neato Robotics and China-based Ecovacs seem to be the biggest potential threats. In fact, Ecovacs has increased its global market share from 5% just three years ago to 10% today. The chart below shows the changes in robotic vacuum cleaner market share from 2013-2016.

Source: Fool.com