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Why iRobot Is Poised To Break Out To The Upside

The steady rise in shares of iRobot (NASDAQ:IRBT) since bottoming at $28 suggests that investors believe in the company's new product lineup. iRobot announced the Roomba 980 for the United States and overseas markets last month. It adjusted to tougher market conditions by lowering operational costs. The company now enters a period of seasonal strength, which means it's time for the stock to break out to the upside.

At present, iRobot is not listed as a "must-own" stock for do-it yourself premium subscribers seeking value. It's on the watch list, along with other robotics firms including HollySys Automation Technologies (NASDAQ:HOLI), Cognex Corporation (NASDAQ:CGNX) and Abb Ltd. (NYSE:ABB). See appendix for a valuation comparison.

Seasonal strength

Seasonal strength in China will support iRobot's fourth quarter revenue growth. Consumers in the region will buy more iRobot products ahead of the Chinese New Year. Single's Day also will give the company a boost in sales. Competition for iRobot is limited, since the brand is strongly recognized, and there is a broad array of products offered. The products offered are: Roomba, Scooba, Mirra and Braava.

In the U.S., retailers stocked up on inventory ahead of the holiday period and should continue in the current quarter.

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