Top Pick Tuesdays – iRobot Corporation

iRobot Corporation (IRBT: NASDAQ)
Price at Preparation: $38.63 (EOD Monday Dec 11, 2023)

What they do

iRobot Corp. (IRBT:NASDAQ) is a robot company, which engages in the design and building of robots. Its products include robot vacuums (Roomba) and mapping technology, as well as pool cleaners. It operates through Domestic and International segments. The company was founded by Rodney Allen Brooks, Colin M. Angle and Helen Greiner in August 1990 and is headquartered in Bedford, MA.

Opinion

In our previous articles, we’ve showcased the use of some complex market tools for trading. This time, let’s switch gears and embrace a simpler approach with a straightforward “buy and hold” stock strategy. There was news in August 2022 when Amazon (AMZN:NASDAQ) set the stage for acquiring iRobot (IRBT:NASDAQ) at $61 USD per share in an all-cash deal, which later settled at $51.75 USD per share, pending regulatory approval. While the deal is on the horizon, bumps appeared, notably concerns raised by European regulators, a hurdle being tackled by both regulators and Amazon with a proposed deadline of February 14th, 2024, for finalizing the agreement. A similar scenario played out earlier in the year with Microsoft’s (MSFT:NASDAQ) successful acquisition of Activision (ATVI), laying the foundation for this trade.

Plan

Review the diagram below, a visual roadmap for our strategy. The target buy-out price and the looming deadline are highlighted. Charting leftward reveals volatility in price action spurred by news events—upsurges with expectations of the deal and downturns with hurdles. Analyst ratings label IRBT as a “Hold.” However, from the current $38.63 to the buy-out target of $51.75, a potential 34% upside realized in just 2 months if the stars align. Hence, this is a straightforward “buy and hold” game plan. As a corroborative measure, check out the Analyst diagram displaying the current 1-year Price Target of $51.

Mitigating Downsides:

The potential downturn poses the option of averaging down—reducing the cost basis of purchased shares, potentially amplifying profits at trade closure. The chart’s price action reflects inherent volatility. Nevertheless, the basis of the buy-out target stands, affirming the strategy UNTIL confirmed news alters the premise of the trade, necessitating a plan reassessment.

RISKS

Relatively speaking, this plan is “safer” than our prior picks. However, no trading venture is without risk. The plan outlines the target and timeframe for the trade. Yet, it’s pivotal to scrutinize, understand, and find comfort in the plan before taking any action. Once in the trade keep your eye on the news for any updates and reevaluate the plan based on that news.

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Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.

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