Amazon.com Inc. (NASDAQ: AMZN) recently announced its plan to buy iRobot Corp. (IRBT), a maker of cleaning equipment. The message propelled IRBT up 19% to $59.54 in trade on August 5. Do falling AMZN prices indicate that investors are sceptical of the deal?
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Amazon pays $1.7 billion for iRobot. The cost encompasses iRobot’s whole business, including robotic vacuum cleaners and air purifiers. AMZN should purchase now since IRBT shares are trading significantly below last year’s peak of close to $100.
iRobot is facing increasing competition from other firms that manufacture robotic vacuum cleaners and other equipment. Competitors include well-known brands such as LG and Samsung, whose ecosystems are difficult to match. As a result, iRobot’s business profitability declined, which was most obvious in the second quarter of 2022, when sales fell by 30% year on year.
Demand for iRobot’s premium robot vacuums presumably fell owing to inflation, causing inventories to surge and cash flow to reach $64 million.
iRobot, on the other hand, has a lot of significant breakthroughs and expertise in building the most advanced house cleaning robots. All of this Amazon.com Inc. (AMZN) can put to use in its exciting smart home projects. Amazon, in the example, has debuted the Astro home robot assistance.
Amazon.com Inc. (AMZN) is expected to expand the home environment by connecting it with its subscription services. For many users, the availability of IRobot technology in this ecosystem might be an incentive to subscribe to Prime services as well as other Amazon services.
As a result, the acquisition makes sense for Amazon and has long-term possibilities. The acquisition of iRobot is expected to be investigated by US antitrust officials. This does not necessarily imply that it will be prohibited, but a huge number of Amazon.com Inc. (AMZN) purchases have already piqued the interest of the US Federal Trade Commission.
AMZN’s price has increased by 2.97 percent in the last week. A glance at its price performance over the last three months indicates that it is up 21.47 percent, while it is down -11.56 percent over the last six months and down -16.38 percent since the beginning of the year.