IRobot shares plunge after Piper Jaffray cuts stock on tariff risk


Britta Pedersen | picture alliance | Getty Images

Vacuum robots from iRobot on display at the Consumer Electronics Show in Las Vegas, Nevada, in January, 2015. 

IRobot will suffer from the latest escalation in the trade conflict between the U.S. and China, according to Piper Jaffray.

The firm lowered its rating to neutral from overweight for iRobot shares, predicting trade tariffs will hurt the company’s business next year.

“We have become incrementally more concerned with the stock’s valuation given the outperformance experienced in 2018 coupled with the recently implemented trade tariffs,” analyst Troy Jensen said in a note to clients Monday. “We believe the recently implemented trade tariffs for robotic vacuums will have a negative impact on iRobot’s guidance for 2019.”

IRobot shares are down 10 percent Monday.

Jensen maintained his $90 price target for the company’s stock, representing 15 percent downside to Friday’s closing price.

The analyst said iRobot uses contract manufacturers based in China and will be hit by President Donald Trump’s tariffs on Chinese imports.

The White House’s latest tariffs of 10 percent on $200 billion of imports from China took effect in late Sept. Trump, in a Sept. 17 statement, said the tariffs would rise to 25 percent on Jan. 1.

“We believe iRobot will likely pass these price increases on to consumers, but this could likely lead to lower growth given the higher price points. If iRobot doesn’t pass the increased prices to the consumer, it would end up with lower gross margins,” he said. “We think either of these two options will not be viewed favorably and impact the original earnings potential for 2019.”

IRobot’s shares have significantly outperformed the market this year. The stock rose 38 percent year to date through Friday versus the S&P 500’s 8 percent gain.

The company did not immediately respond to a request for comment.

Source link

Products You May Like

Articles You May Like

UBS says no rate cut coming soon, despite what the market thinks
Let’s stop the argument that financial education doesn’t work
When travel insurance is worth the extra cost
China’s job market faces new pressure as trade war with US drags on
Campbell promises bone broth, ‘plant-based cooking platform’

Leave a Reply

Your email address will not be published. Required fields are marked *