E IRobot Attempting A Breakout After Short Interest Spike

The hype that has been created by the short squeezes on GameStop (GME) and AMC Entertainment (AMC) has caused some interesting patterns on various charts. So many stocks that had high short interest saw big spikes in their price and we saw jumps of 50%, 75%, and even some over 100%.

Some of the stocks that jumped didn’t have a fundamental foundation to justify the high prices and many of those stocks have dropped back down, including GameStop and AMC Entertainment. On the other hand, there were some stocks that spiked which could justify the move with solid fundamental indicators. One such company is iRobot (IRBT).

When the short squeeze craze hit, iRobot was trending higher but was trading just under $100. When investors realized the stock had a huge short position on it, they pushed the stock all the way up to $197.40, but it has since settled back and is now trading at $135.29. Even though the stock is well off its high, it looks to be breaking out with its move above $130.

(Click on image to enlarge)

We see on the weekly chart how the $130 area served as resistance back in the first half of 2019, but now the stock is moving above the former resistance level. The chart looks a little odd because of the huge spike a few weeks ago, but if we ignore that black swan event, this move seems to be more important.

Strong Fundamentals Make iRobot Different from GameStop and AMC

We pointed out earlier how GameStop and AMC Entertainment’s big spikes were based on a short squeeze without solid fundamentals backing them up. That isn’t the case for iRobot. The company has seen strong earnings and revenue growth over the last few years and has helped the stock garner a “strong buy” rating from Tickeron’s Scorecard.

Looking at Tickeron’s fundamental screener, iRobot scores really well in its Outlook Rating, the SMR Rating, and the P/E Growth Rating. The only area where the stock scores poorly is in its Seasonality Rating. The company has seen earnings grow by an average of 14% per year over the last three years and they jumped by 22% in the fourth quarter. The company just reported Q4 results earlier this week.

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Edward Simon 7 months ago Member's comment

Interesting post. I never looked at this stock before. Maybe I will buy the stock before the product. The company seems to be in the news of late, though seems to have been a better buy last year.

Adam Reynolds 7 months ago Member's comment

Agreed.

Bill Johnson 7 months ago Member's comment

Great article, thanks.

William K. 7 months ago Member's comment

Thanks for the interesting post about Irobot.

I read about the robotics companies in the technical publications, where we we hear far more the details of the new releases and developments, What is very interesting is the fundamentally new applications that some of the new features allow. What all of this means is that some robot makers have created products that suddenly create a new market for their products. So there can be a large jump in company profits before the word even gets out. I believe that is what is the case with Irobot. It will certainly be interesting to watch.