Buy iRobot Corporation (IRBT) Stock Because the Robot Revolution Is Here

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Here come the robots.

iRobot Corporation (NASDAQ: IRBT ) stock is higher by about 20% in today's session after the maker of consumer robots reported blowout quarterly results thanks, in large part, to, Inc. (NASDAQ: AMZN ). IRBT reported that U.S. revenues rose an astounding 46% year-over-year. The big catalyst? Amazon Prime Day, where iRobot's Roomba (the friendly vacuum cleaning robot) was a huge hit.

Buy iRobot Corporation (IRBT) Stock Because the Robot Revolution Is Here

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So here's the thing. The robots are starting to show up to the party. There are only a few now, but by the end of the night, robots will be everywhere at the party.

And guess who is really happy that there are a lot of robots at the party? IRBT shareholders.

In other words, the uptrend in iRobot stock is just getting started because the robot revolution is likewise just getting started.

That means IRBT stock is an attractive long-term investment.

iRobot Is Leading the Robot Revolution

iRobot calls itself the "consumer robot company," and with good reason. The company has been the leader of the global robotic-technology market for 25 years. Growth has been good, and IRBT stock has done "OK."

Why just OK? Well, consumer robots have been cool for some time, but that is about all they've been. They weren't particularly useful due to technology constraints, and those constraints really kept most consumer robots from going mainstream.

But not anymore. As the concepts of the smart home and Internet of Things (IoT) have grown, so has the consumer robot market. The smart home and IoT trends are allowing consumers to connect everything in their homes through the cloud. That includes lights, thermostats, security cameras and yes, even floor-cleaning robots.

Consequently, as cloud-connected devices have become a thing, iRobot's Roomba has surged in popularity.

This is easy to see in IRBT's growth numbers. U.S. revenue jumped 46% higher in Q2 - iRobot sold more than twice as many robots during Prime Day 2017 as they did in Prime Day 2016 (which was twice as many as they sold in Prime Day 2015). The Roomba 652 was the top seller among not only robotic vacuum cleaners, but also among all floor care products as well. It was also the No. 2 seller in all home & kitchen for Prime Day.

The robot revolution is clearly here, and it's just beginning. As the smart home and IoT markets become more and more mature, more and more consumer robots will enter the marketplace. For example, iRobot has already rolled out Braava and Braava Jet, which are the company's wet floor-care robots. This is just the first of what will be many iterations of consumer robots iRobot rolls out to the marketplace.

With a promising pipeline of products to come, the IRBT growth story looks like it could go on for a long time.

This is especially true considering iRobot's international growth narrative, which is also in its early innings. The Europe, Middle East and Africa (EMEA) market only saw revenues grow 10% last quarter, and that isn't surprising considering the U.S. often leads the rest of the world in technology adoption. Once this trend catches globally, though, as it inevitably will, the EMEA market will follow suit with rampant growth to offset what will likely be slowing domestic growth at that time.

This "strong U.S. growth first, strong international growth second" is an expansion strategy successfully executed by many tech companies, most notably Netflix, Inc. (NASDAQ: NFLX ).

The Financials at IRBT Will Only Get Better

The robot revolution will make iRobot's financials look a lot better.

Between 2013 and 2016, IRBT was a steady growth story. Revenues grew around 11% per year. Sales growth was accompanied by gross margin growth. Overall, about 11% annual revenue growth flowed into 16% annual earnings-per-share growth from 2013 to 2016.

But growth is starting to pick up thanks to gradual mainstream adoption of consumer robots. In 2017, IRBT expects revenues to grow 24%. Meanwhile, gross margins continue to expand, and IRBT thinks that 24% revenue growth will flow into 28% earnings-per-share growth.

In other words, an 11% topline growth story is turning into a 24% topline growth story. A 16% earnings growth story is turning into a 28% earnings growth story.

No wonder IRBT stock is soaring higher. And it will keep going higher because the 2017 growth rates are here to stay. Considering how quickly the IoT and smart home markets are maturing, consumer robot adoption will only accelerate over the coming years.

Bottom Line on IRBT Stock

Buy and hold for the long term. The robot revolution is just getting started.

As of this writing, Luke Lango was long IRBT.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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