Is Amazon Stock a Buy After Agreeing to Buy iRobot at a 22% Premium?
On Aug. 5, Amazon (NASDAQ: AMZN) announced it was buying iRobot (NASDAQ: IRBT), which makes robotic vacuum cleaners including the Roomba, for $61 per share in an all-cash deal -- a 22% premium to where iRobot stock traded at the time. This acquisition news understandably overshadowed the release of iRobot's financial results for the second quarter of 2022. However, considering Q2 showed a sharp drop in revenue and profitability, perhaps this explains why iRobot is selling to Amazon at this time.
For iRobot shareholders, this is likely a disappointing finale for a stock that had so much promise, although its slight buyout premium is welcome. For Amazon, the acquisition makes a lot of sense even though it likely won't move the needle. Here's why.
In Q2, iRobot's revenue was down 30% year over year. Considering its flagship Roomba product line occupies the premium end of the robotic vacuum market, it's possible that consumer demand plummeted due to inflation. The company's management said retailers unexpectedly canceled orders in Q2, leading to a sharp buildup of inventory and resulting in a hefty $64 million operating loss.
Source Fool.com
