Bears Rejoice In iRobot Stock Collapse

Short interest remains very elevated on IRBT stock

by Josh Selway

Published on Feb 8, 2018 at 9:13 AM

Shares of robotic vacuum cleaner manufacturer iRobot Corporation (NASDAQ:IRBT) are about to get crushed when the market opens, with the stock already down 19.4% in electronic trading, likely due to the company's lower-than-expected full-year earnings outlook. On an adjusted basis, however, the company topped earnings estimates for the fourth quarter and revenue was well above analysts' forecasts. Nonetheless, if this pre-market price action comes to fruition, it would extend what's been a turbulent 12 months for IRBT stock.

Jumping right in, the equity hit a record high of $109.78 back in July, but since then it's been tough sledding. The shares gapped lower in September and October, while experienced headwinds from negative buzz for its signature Roomba vacuum around Black Friday. iRobot stock has recovered since bottoming at $63 in December, closing yesterday at $88.04 after a recent bounce from the 50-day moving average, but the security is set to fall well below this key trendline today.

The volatile trading has captured the attention of short sellers. Short interest on IRBT began to increase rapidly following the stock's July peak and continued to rise until the aforementioned December low. Since then a number of short sellers have covered their positions, including a 27.6% drop in the two most recent reporting periods. Despite this decline, short interest still represents almost one-fourth of the equity's float, so plenty of bears could still profit from today's pending slide.

irbt stock price

Rounding out the sentiment picture, there's been no reaction from analysts following the earnings release, but that could be because they're already so bearish. For instance, not one of the eight brokerage firms in coverage recommend buying the stock, and the average 12-month price target is just $73.80. Options traders have also shown bearish tendencies, as the March 85 put saw the largest increase in open interest during the past 10 days.

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