iRobot(NASDAQ: IRBT) stock has been a somewhat volatile investment option in the consumer goods space. The company is mainly known for one product line, the Roomba robotic vacuum cleaner. If iRobot sells a lot of Roombas, its investors clean up, so to speak. If they don't, iRobot's stock performance tends to suck, and not in a good vacuum-y way. Since mid-2021, it's been more of a sucking sound.
But what do potential investors do when they see a sudden jump in iRobot stock that seems to have little to do with robots, vacuum cleaners, or the company's actions? The catalyst shouldn't be ignored, but it also shouldn't prompt sensible investors to flip the switch and end up getting taken for a ride with this troubled stock.
Bullish news if you're into meme stocks
This year hasn't been easy for iRobot. In late January, investors got hit with a triple shot of disappointing news. First, Amazon and iRobot agreed that the former wouldn't acquire the latter. Second, iRobot disclosed its plan to lay off approximately 350 workers, or a whopping 31% of its staff. Moreover, the company revealed that iRobot CEO Colin Angle would step down from that role, effective immediately.
iRobot stock tumbled 10% because investors had harbored hope that Amazon would acquire the company, though the other news items certainly didn't inspire confidence among iRobot's shareholders. The sour sentiment continued after the Amazon bombshell, with iRobot stock continuing to slide through April.
But April showers have been known to bring May flowers. iRobot stock got a bump after a decent quarterly earnings report on May 7. And then a very recent big move occurred with iRobot stock on May 13, when the share price gained 19.4% and landed at $13.40.
Was there bullish news on that day? Nothing notable and company-specific happened, but it wasn't difficult to identify the catalyst. On May 13, GameStop stock surged 74.4% higher because Reddit user and meme-stockshort-squeeze trader Keith Gill (user name Roaring Kitty) had posted on the X (formerly Twitter) social media platform for the first time in a long time.
A slew of former meme stocks, including AMC Entertainment, shot up like a rocket in tandem with GameStop stock. Perhaps in search of new, meme-worthy shiny objects, some speculators decided to ramp up the trading volume and share price of iRobot stock that day.
Now, some news that actually matters
While serious investors generally don't base their decisions on meme-stock trends, it would be imprudent to simply ignore the recent GameStop stock news as it could impact iRobot in the short term. That being said, there's a more important development that actually bodes well for iRobot as a company.
Specifically, iRobot found its new chief executive. He's Gary Cohen, an executive who has management experience at Gillette, Timex, and Energizer. Cohen got the job earlier this month and it's a valid reason to wonder if iRobot is starting a new chapter after the Amazon letdown.
Another development (buried in the earnings report mentioned above) is that iRobot reported some actual profitability in 2024's first quarter, depending on how you measure it. The company reported GAAP net income of $0.30 per share during the quarter, versus a GAAP-measured net loss of $2.28 per share in the prior quarter and a loss of $2.95 per share in the year-earlier quarter.
To be clear, these developments aren't total confirmation that iRobot is in great financial shape. Its non-GAAP net loss narrowed moderately year over year from $1.82 per share to $1.53 per share. Yes, this was an improvement, but the company is still not profitable by that measure.
Additionally, iRobot recorded Q1 2024 positive cash flow from operations of $1.4 million. However, this result may be misleading as it "benefited from one-time net proceeds of $75 million from transaction termination fee paid to the Company by Amazon.com." So without that, iRobot's cash flow would presumably have been deep in the red.
If you're thinking long-term about iRobot stock (as most investors should be), your main focus should be Cohen's stewardship of iRobot in the coming quarters. With that in mind, investors might choose to explore their speculative sides, with or without meme dreams, by adding a few shares of iRobot stock to a diversified portfolio.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.
