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From: Paul H. Christiansen10/22/2017 10:44:00 AM
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iRobot to Play Leadership Role in Home Robotics Space: Introducing 5-Year Model

Today we’re rolling out our iRobot 5-year model, joining Loup Ventures’ Apple and Tesla model coverage. We feel it’s important to write on iRobot even though it’s a small company, $2.1 billion market cap, because iRobot will likely play a leadership role in the evolution of the home robotics space over the next decade.

Due to advancements in robot functionalities and lower costs, robots are quickly becoming a common technology in our homes. These domestic robots are systems used to perform household chores such as vacuuming, mopping, and mowing the lawn. While home robot adoption has accelerated in recent years, penetration rates remain low and we foresee the highest growth still to come.

Leading the domestic robot charge is iRobot (IRBT), which is the industry leader in robotic vacuums and wet floor (aka mops) products. Driven by iRobot’s robust robotic engineering expertise, as well as brand awareness, we believe iRobot will be the leading provider of home robot technology for the next several years. Given iRobot’s leadership in robotics, a space we spend a lot of time working on, we’ve developed a 5-year model for the company ( here).

We estimate that 5.0M domestic robots were sold in 2016, which is up 24% from the prior year, and the total market value grew 23% to $1.4B. While iRobot does not compete in all domestic robot categories, they do lead the largest (vacuums) and fastest growing (wet floor) markets. The robotic vacuum market accounts for the largest percentage (70%) of domestic robot spend. In 2016, 4.1M robotic vacuums were sold, up 18% year/year, and the market value grew by 20% over that same time to ~$940M. The faster sales growth was driven by faster growth among higher-end systems. The global robotic vacuum market has grown ~18% per year since 2012, but only accounted for ~21% of total vacuum spend in 2016. Given penetration rates remain low, we believe there is plenty of room for multiple double-digit years of growth to come.

Consumer awareness for robotics is increasing, and as households begin to adopt this technology they are becoming more comfortable with other forms of robotics, such as wet floor products and lawnmowers. While both these markets only account for 5% and 25% of domestic spend, respectively, both are expected to see 20%+ annual growth through 2025. Over the next 10 years we anticipate the entire industry to see double-digit unit growth annually, and by 2025 believe 26.5M domestic robots will be sold, which will equate to a $5.7B market opportunity. See our domestic macro model here. While iRobot is well positioned in the vacuum and wet floor markets, we believe the company’s industry leading robotics expertise will unlock for them opportunities in other domestic markets.

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