Amazon’s iRobot Acquisition: What Wall Street Is Saying

Amazon  (AMZN) - Get Free Report has announced a new acquisition: Roomba maker iRobot  (IRBT) - Get Free Report. The vacuum cleaner company has been struggling with supply-chain constraints and decreasing demand, making now the perfect time for Amazon’s move.

The Amazon Maven has given its perspective on the matter: It's a fairly priced acquisition for one of the first Industry 4.0 companies.

Today, we check out Wall Street’s view. What do the world’s best analysts have to say?

(Read more from the Amazon Maven: Why Amazon's E-commerce Ecosystem Is Unbeatable)

Amazon or Bankruptcy?

Telsey Group’s Joseph Feldman has highlighted how iRobot's business has “slowed significantly.” Second-quarter revenue was 30% lower year over year, and the company reported a $38 million loss.

The inflationary scenario could be (at least partially) to blame. As essential purchases such as food, fuel, and rent become more expensive, customers delay buying nonessentials — like autonomous vacuum cleaners — until better economic times.

In this scenario, Amazon’s endless amount of cash plays an important role. The acquisition could keep iRobot from going bankrupt in the face of 2022's headwinds.

“While iRobot needs operational support and looks to be facing supply-chain and other headwinds to earnings in the near term, Amazon is adding a strong brand in consumer robots that already has devices in homes across the world,” Feldman wrote.

There's Only One Threat to the Deal

The Amazon-iRobot acquisition seems like an excellent deal for both companies. However, there is a third party that could threaten the deal: regulators.

According to Needham’s James Ricchiuti, the deal “is likely to get a fair amount of scrutiny from regulators, given the current negative view of Big Tech in Washington and Europe.”

Aside from regulators, the analyst seems to believe there are no risks to the transaction, because (1) iRobot is a “natural extension” of Amazon's flywheel business strategy and (2) it is “unlikely that other suitors will emerge.”

Amazon's Long-Term Strategy

Amazon’s main interest is using iRobot's technology to improve its own robotic innovations in order to become an Industry 4.0 company.

As Telsey Group’s Joseph Feldman wrote, “In our view, Amazon is likely to leverage iRobot’s robotic technology and data platform to innovate and expand new smart-home products, as well as actively sell these smart everyday products to its 200 million-plus global Prime members.”

In this case, Amazon could be aiming to dominate a new high-potential, growing market.

According to Snigdha Parida, senior analyst at analytics company GlobalData, the robotics industry is expected to reach $568 billion by 2030, with the consumer robotics segment reaching $70 billion at a 29% compound annual growth rate (CAGR) between 2020 and 2030.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Amazon Maven)