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Why iRobot Stock Lost 16% in May

What happened

Robotic cleaning device specialist iRobot (NASDAQ: IRBT) underperformed a weak market last month as the stock fell 16% compared to a 7% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decline put shares back to single-digit returns in 2019 after having been up by almost 60% in late April.

Image source: Getty Images.

So what

Shares have been under pressure since a late-April first-quarter earnings report showed slowing sales growth and falling profit margin. The Roomba vacuum manufacturer added to investors' worries last month by introducing new cleaning devices that are likely to pinch profitability as the sales mix shifts toward these innovative, but costly, products.

Now what

Shareholders have a few short-term worries about iRobot's business, including rising tariffs on its Chinese-based imports. There's always the potential that its newest product lineup fails to catch on with consumers during the key holiday season, too. But these risks are always present in a customer-facing tech business like iRobot's, and investors have to balance them against the potential for strong growth as the robotic cleaning device industry matures into a far larger market over time. Meanwhile, the company's cost and demand trends will become clearer when it posts its second-quarter earnings results on June 23.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends iRobot. The Motley Fool has a disclosure policy.


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