Small Cap's 15 Minutes of Fame Could be Your Ticket to Double-Digit Profits
Technical traders often make buy and sell decisions in a robotic way, meaning they buy and sell whenever a stock hits a specific price point. But when it comes to robotic vacuum cleaner manufacturer, iRobot Corp. (NASDAQ: 8IRBT), there's a whole lot of passion pushing this stock higher.
Last week, shares of this small-cap stock spiked nearly 14% in one day after the company reported much better-than-expected first-quarter earnings while also raising its full-year guidance.
The company is best known for making those Roomba brand vacuum cleaners, which basically vacuum your entire house for you, even while you're not home. The company also sells the Scooba, which takes the cleaning a step further by washing your floors for you.
Yet perhaps the most important products made by iRobot -- at least from a societal prospective -- are the robots the company builds for law enforcement and military purposes.
The most recent example of this use was following the bombings in Boston, where authorities used the iRobot PackBot, a remote-controlled tactical mobile robot with the capability of detecting and disposing explosive devices. Charlie Vaida, a spokesman for the Massachusetts-based company, confirmed in a statement to social news website Mashable that its PackBot model was used by the Boston Police Department to inspect a vehicle that authorities thought may have been used by Marathon bombing suspect Dzhokhar Tsarnaev.
The incident upped iRobot's profile with the public, as well as on Wall Street. Of course, the real fireworks for IRBT were the Q1 numbers. The company said it earned $8.4 million during the first three months of the year, which translates into earnings per share (EPS) of $0.29. iRobot earned just $653,000, or $0.02 per share, during the same quarter a year ago.
The company also cleaned up on the revenue front, with Q1 top line rising 8.6% to $106.2 million, up from $97.8 million in the year-ago period. The consensus forecast on Wall Street was for EPS of $0.17 on revenue of $103.5 million.
Perhaps the biggest positive for IRBT shares going forward is the upbeat expectations. The company said that it anticipates revenue in the current quarter to be anywhere from $128 million to $133 million, and it projects EPS to be between $0.15 and $0.20. Both metrics are well above current estimates for EPS of $0.12 on revenue of $115 million.
For the full year, iRobot raised its revenue estimate to $485 million to $495 million, which is up nicely from the prior range of $480 million to $490 million. The company also said EPS would likely come in between $0.80 and $1, which is significantly higher than the previous guidance of $0.57 to $0.72.
The headlines for iRobot are great, as are the numbers, and that makes this small-cap stock a great trading idea for even the most robotic traders.
Recommended Trade Setup:
-- Buy IRBT at the market price
-- Set stop-loss at $26.60, approximately 6% below the current price
-- Set initial price target at $34.69 for a potential 23% gain in the next several months