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Technology Stocks : iRobot Corp. -- Ignore unavailable to you. Want to Upgrade?

To: 1moretime who wrote (52)	2/17/2007 3:36:48 PM
From: deeno	Respond to of 88

BTW is this you or your web page? Here is the other comment alluded to. iRobot Corp. Comm’l Sales Disappoint, Offset by Robust Defense IRBT beats est by 4¢ on lower expenses, maladroit comments with Street apt to contribute to sell-off today: 2006 results were mixed results with sales of $189MM $6MM+ lighter vs. our above guidance ests and EPS of 14¢ beat our 10¢ est on 22¢ lower COGS $119MM vs. 125MMe. Op expenses of $70MM in line while other income of $3.8MM above our $2.6MM clipped 5¢ of EPS. 2007 sales guidance $225-235MM, +19-24% y/y, lower than our $258MMest but $23-33MM variance can be made up for with a solid defense order. Pretax EBIT guidance surprisingly lower than our projections raises warning flags, which coupled with a sparse earnings release providing little by way of insight or explanation to pre-empt concerns atop active insider selling points to enhanced negative sentiment and we would expect the shares to sell off. Slowing commercial but robust defense demand long-term catalyst: Home robot dels grew 9% in ‘06 to 725K vs. 12% in ’05 (663K units) – well below our 875K est. Clearly, our 2007 projections of 960K are far too high, but we’ll await management explanation on the call. Defense, as we long expected, continues to outperform: 2006 Packbot dels of 385 bested our est by 60, +53% y/y vs. 252 in 2005. Gov’t & Industrial sales handily bested our ests at $77MM vs. $57MMe, incl $21MM in contract sales. We expect demand for defense products to continue. Implications: 2007 sales guidance is $25MM lower than our thinking, possibly $50MM below consensus expectations but EBIT story is a big question. Stock is apt to sell off today and would be buyers at these levels.

To: 1moretime who wrote (52)	2/20/2007 9:20:39 AM
From: deeno	Respond to of 88

Heidi gives up iRobot Corp. Less Favorable 1H07, Poor Visibility = “Show Me” Stock, Tempering Rating, PT What's Changed Rating Overweight-V to Equal-weight-V Price Target $38.00 to $20.00 2007E EPS adj. for cons. From $0.53 to $0.10 2008E EPS adj. for cons. From $0.85 to $0.30 2009E EPS adj. for cons. Introducing $0.60 Key Points 1H07 Negative Sentiment Apt To Persist: 1H Losses, Roomba Demand Debate, Strong Defense Demand But Timing Tough To Peg – Stock Apt To Bounce Back But Not Apt To Develop Momentum Until Clouds Clear Outlook Set To Improve 2H07-2008, But We’re Not 100% Confident – Management Plans Improving Profits, Strong New Product Introduction 2H07, Ramping Defense – Misses In Past Give Us Room For Doubt Trimming 2007-08 EPS, Revised PT to $20 Maintaining Attractive View for Aerospace/Defense: The commercial aerospace cycle appears poised for a prolonged upcycle, with a peak occurring sometime after 2011, which suggests midcycle valuation persists, & thus attractive upside potential for the group. Plateauing defense budget, consistent strong free cash flow, pricing power and reasonable valuations points to additional upside for defense. Investment Case Summary & Conclusions We’re reducing our rating on IRBT to a Equal-weight-V from Overweight-V, which better defines the heightened risk and reduced visibility and may take the stock down further to Underweight if visibility/execution does not improve. The first public pure play in robotics, IRBT retains formidable intellectual property and has an entrepreneurial, energetic management team, but important missteps atop reduced visibility and planned losses in 1H07 has placed this stock in the “show me” category. . IRBT is the worst performing stock in our coverage universe, down 15% YTD vs. aerospace/defense average +9% atop 2006, which also significantly underperformed. Management guidance for a tough 1H07 after significant insider selling all but ensures enduring skepticism and 2H07 will be an important challenge and milestone to prove the new product introductions can significantly improve outlook. We continue to be enthused with the defense portion of the story, however investors remain keyed to the home robot angle which has been mixed. Thus our Equal-weight-V rating better defines a stock as ‘buyable’ for those with a strong stomach for risk as an 18-month time horizon, as the defense portion of the business is apt to continue to be the frontline story. With tempered growth outlook for a top-line growth story, IRBT warrants a reduced valuation vs. prior thinking. Lacking comps and performance to warrant a “high tech defense” multiple, we evaluated valuation from a sum of the parts analysis, using retail product multiples on the home robot portion of the business and high tech defense multiples on the defense business, which pointed to a stock worth $20 or higher in the next 12-18 months. Assuming management executes on plan, this represents attractive return, but we are have moved to an Equal-weight-V rating to highlight the greater risk in achievement than in our Overweights with similar potential stock upside. Potential triggers on the stock include possible strong June selling season and planned strong 2H07 including new product introduction, new retail stores for Scooba, growing international penetration, LRIP on R-Gator, ramp up in Warrior for 2008. Planned turn in profitability starting in 2H07 will be an important step.