E-commerce giant Amazon (AMZN) announced a purchase agreement on Friday iRobot (IRBT), maker of home cleaning robots like Roomba vacuum cleaners, for $1.7 billion in cash. Amazon shares fell on the news while iRobot shares soared.
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Seattle-based Amazon said it will pay $61 a share for Bedford, Mass.-based iRobot. The deal is subject to customary closing conditions, including the approval of iRobot stockholders and regulatory approvals.
In trading today, iRobot shares rose 19.1% to 59.54. It ended Thursday’s regular session unchanged at 49.99.
Meanwhile, Amazon shares fell 1.2% on Friday to close at 140.80.
Special Roomba Hot Prime Day Vacuums
“For many years, the iRobot team has demonstrated its ability to reinvent how people clean with incredibly practical and inventive products,” said Dave Limp, senior vice president of Amazon Devices, in a news release.
“Customers love iRobot products, and I’m excited to work with the iRobot team to invent ways to make customers’ lives easier and more enjoyable,” he said.
Amazon already has a significant consumer electronics business. It makes Alexa-enabled smart speakers, Fire TV streaming devices and TVs, tablets, Kindle e-book readers and home security devices. It has also tried home robotics with the companion and home monitoring robot Amazon Astro.
With iRobot, Amazon gets Roomba robot vacuums, Braava robot mops, Aeris air purifiers and other gadgets.
Roomba vacuums tend to be top sellers in the electronics category during Amazon Prime Day shopping events.
Amazon’s stock ranks first in the group
Amazon’s stock ranks No. 1 out of 59 stocks in IBD’s Internet Retail Industry Group, according to IBD Stock Review. But it has a mediocre IBD Composite Rating of 69 out of 100. The Composite Rating scores a stock’s key growth metrics against all other stocks, regardless of industry group.
IRobot’s stock ranks sixth out of 12 stocks in IBD’s home appliances and goods industrial group. But it has an ultra-low composite rating of 4.
IRobot has reported that sales have declined for three consecutive quarters. In the June quarter, its revenue fell 30% year over year to $255.4 million. And it also posted losses for the past three quarters.
Acquiring iRobot will give Amazon more capabilities in the smart home market, says MKM Partners analyst Rohit Kulkarni. Amazon competes in this market with alphabet‘s (GOOGLE) Google and apple (AAPL), it said in a note to clients. Kulkarni rates Amazon stock a buy with a price target of 170.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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